Oil keeps diving — and it’s taking Wall Street with it.
U.S. stocks are set to open at their lowest levels since October 2014 on Wednesday after crude oil dropped below $28 a barrel. The Dow is on track to decline about 250 points, while the S&P 500 and Nasdaq could lose another 1.5% a piece.
It’s the latest blow in what’s already been the worst start to a year on record for the stock market. The Dow is down more than 8% in 2016.
“Despite improving valuations, global equities continue to get hammered,” Bespoke Investment Group wrote in a client note. The firm said the appetite for risk remains “awful.”
Turmoil in China and the crash in crude oil prices remain the main culprits for the market mayhem. While China’s stock market dropped “only” 1% overnight, the energy market was considerably less quiet.
Oil slipped below $28 a barrel late Tuesday for the first time since September 2003, driving U.S. stock futures sharply lower. Crude oil has been slammed in recent days by concerns over sanctions lifting on Iran, which is expected to flood the world with more oil at exactly the worst time given the supply glut.
Global markets remain in turmoil, with Japan’s benchmark Nikkei 225 tumbling into bear market territory on Wednesday. That’s market jargon for when an index or a stock dives 20% from a prior high.
The key level to watch on Wall Street is 1867.01 on the S&P 500. That’s the intraday low on August 24, the day the Dow freaked everyone out by briefly plummeting more than 1,000 points. The S&P 500 has repeatedly “tested” that level in recent days, closing above it despite the pressure on stocks.
Michael Block, chief market strategist at Rhino Trading, thinks U.S. stocks “look oversold” at current levels and believes now is the time to look for buying opportunities.
“I am watching that August low and below that is where I come alive, albeit carefully,” Block wrote in a client note. “I am not jumping in with both feet.”