By Chris Matthews, MarketWatch , Joy Wiltermuth

WTI gains more than 14%, its biggest jump in 11 years

U.S. stocks ended lower Monday after a weekend attack on Saudi Arabia's oil-production facilities unsettled global markets, halted the Dow's eight-session winning streak and sent crude prices rocketing higher.

The attacks played out in the Middle East as stocks were on the brink of record highs ahead of eagerly awaited central-bank meetings, headlined by the Federal Reserve's interest-rate decision on Wednesday.

How are major benchmarks faring?

The Dow Jones Industrial Average fell 142.7 points, or 0.5%, to close at 27,076.82, ending an eight-day winning streak. The S&P 500 index shed 9.43 points, or 0.3%, to finish at 2,997.96, while the Nasdaq Composite Index dropped 23.17 points, or 0.3%, to end at 8,153.54.

The Dow finished Monday around 1% below its record all-time closing high of 27,359.16 hit on July 15, while the S&P 500 stood about 0.9% from its record close at 3,025.86 set on July 26. The Nasdaq Composite Index was off 2.1% from its all-time closing high of 8,330.21, also hit on July 26.

What's driving the market?

Wall Street was fixated on an attack of Saudi oil production facilities that happened on Saturday, knocking out 5.7 million barrels of daily production, representing about 5% of the world's oil output.

The largest-ever disruption to oil production, as it has been described by experts, has momentarily overshadowed a much-anticipated two-day Fed meeting that gets under way on Tuesday.

West Texas Intermediate crude for October delivery the U.S. benchmark contract, added 14.68%, or $8.05, to close at $62.90 a barrel on Monday, its biggest one-day percentage climb since September 2008, while November Brent crude marked its sharpest-ever daily percentage rise, 14.6%, for a gain of $8.80, to trade at $69.02 a barrel, according to Dow Jones Market data.

Surging oil prices hold the potential to disrupt the global economy if the rise is sustained, experts say. Climbing prices also would come as global economies, including China, a major importer of oil, have shown signs of economic strains.

On Sunday, President Donald Trump said he authorized the release of oil, if needed, from the Strategic Petroleum Reserve, or SPR, to mitigate any price surges. The U.S. holds about 630 million barrels of oil in the reserves, which is viewed as the biggest such stockpile of crude.

However, market participants are worried about the duration of the oil disruption to Saudi Arabia's production and the possibility of further escalation between Saudi Arabia and those responsible for the Saturday attack of its Abqaiq plant and Khurais oil field. Houthi rebels have claimed responsibility for the attack but the U.S. has blamed Iran, which the Islamic Republic has forcefully denied.

Washington and Tehran are locked in their own dispute after Trump pulled out of a global nuclear pact with the country and imposed fresh sanctions on its oil exports.

Still, some strategists appeared somewhat sanguine about the impact of the Middle East drama on U.S. markets.

"It will take a lot to disrupt the bull case for U.S. stocks and today's selloff that stemmed from the Saudi oil field attacks could see buyers eventually re-emerge," wrote Edward Moya, senior market analyst at brokerage Oanda, in a daily research note. "The possibility of a U.S. military escalation remains a key risk but that is probably not going to happen," he said.

Doug Cote, chief market strategist at Voya Investment Management, pointed out that while stocks were down about half a point Monday, the reaction a few years ago to such a major geopolitical event likely would have been sharper.

"A short few years ago the market would have been down 5%," Cote told MarketWatch in an interview. "People should take that as a sign of how resilient the market its. Any good news, and this market could rip up."

Check out: Dow, Nasdaq fall but market breadth is leaning bullish (http://www.marketwatch.com/story/dow-nasdaq-fall-but-market-breadth-is-leaning-bullish-2019-09-16)

Investors also were looking forward to a meeting of the Federal Reserve's interest-rate setting committee beginning Tuesday and concluding Wednesday, after which Chairman Jerome Powell will announce the central bank's latest policy decision.

Expectations that the Fed will cut interest rates a second time this year, by a quarter percentage point to between 1.75% and 2% have fallen in recent days, after surprisingly strong consumer price-growth (http://www.marketwatch.com/story/cheaper-gas-caps-consumer-inflation-in-august-cpi-shows-but-price-pressures-appear-to-be-rising-2019-09-12) and retail sales data (http://www.marketwatch.com/story/retail-sales-get-big-lift-in-august-from-auto-purchases-but-most-stores-post-declines-2019-09-13) released last week spoke to the strength of the U.S. economy.

Fed-funds futures markets now place a roughly 80% chance (https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html) that the Fed will cut rates Wednesday, down from about 95% last week, according to CME Group.

Which stocks are in focus?

Chevron Corp. (CVX)shares were the Dow's best performing Monday, rising 2.2%, while fellow oil producer Exxon Mobil Corp. (XOM) also gained, advancing 1.5%.

Walt Disney Co. (DIS) chief executive Robert Iger has resigned from the board of Apple Inc.(AAPL), the entertainment giant said Friday evening (http://www.marketwatch.com/story/disney-ceo-iger-resigns-from-apple-board-2019-09-13). Earlier last week, Apple revealed a new streaming service that will compete with a planned service by Disney.

Shares of General Motors Co. (GM) fell 4.2% after nearly 50,000 United Auto Workers went on strike (http://www.marketwatch.com/story/49000-us-auto-workers-to-strike-at-gms-plants-2019-09-15) amid negotiations between worker and management for a new four-year contract.

How are other markets trading?

The yield on the 10-year U.S. Treasury note fell 5.8 basis points to 1.843% after the bond market saw the biggest weekly sell off in several years (http://www.marketwatch.com/story/treasury-yields-inch-higher-ahead-of-us-retail-sales-data-2019-09-13). Bond prices fall as yields rise.

Read: Saudi oil attack shows bond traders are worrying more about growth than inflation (http://www.marketwatch.com/story/saudi-oil-attack-shows-bond-traders-are-worrying-more-about-growth-than-inflation-2019-09-16)

Gold prices jumped 0.8% to end (http://www.marketwatch.com/story/gold-scores-a-pop-from-historic-oil-outage-2019-09-16) at $1,503.10 an ounce, while the U.S. dollar rose 0.4% relative to a basket of leading rivals.

In Asia overnight Monday, Hong Kong's Hang Seng Index fell 0.8%. In Europe, the Stoxx Europe 600 fell almost 0.6% while the U.K.'s commodity-heavy FTSE declined 0.6%. The Japanese market was closed in observance of a holiday.

 

(END) Dow Jones Newswires

September 16, 2019 16:33 ET (20:33 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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