NEW YORK -- Oil prices slumped to 5½-year lows on Monday, pulling down emerging market assets and boosting demand for the safe-haven yen, while global equity markets fell further after last week's rout amid nagging worries about worldwide growth.
Stocks retreated as crude oil prices gave up early gains after the Organization of the Petroleum Exporting Countries restated its determination not to cut output despite a global energy glut.
Major European stock indexes fell more than 2 percent, while the Nasdaq fell 1 percent, with the Dow and S&P 500 also losing ground after earlier falling about 1 percent each.
The ruble hit record lows and Russian assets plunged on concern about possible new U.S. sanctions over Ukraine, weak oil prices and one-sided bets that the currency would extend its slide.
A rise in yields on U.S. Treasuries was limited by persistent concerns about weakening growth and inflation globally. U.S. stocks fell even as U.S. manufacturing output posted its biggest gain in nine months in November as production expanded across the board, pointing to underlying U.S. economic strength.
%VIRTUAL-pullquote-The continued free-fall in crude is the main thing here.%"The continued free-fall in crude is the main thing here," said Uri Landesman, president at Platinum Partners in New York.
Landesman said the benchmark S&P 500 could fall further and test 1,750, a decline that would mark the year's first correction as defined by a drop of 10 percent or more, despite several sharp sell-offs that never met the definition in 2014.
The Dow Jones industrial average (^DJI) closed down 99.99 points, or 0.58 percent, at 17,180.84. The Standard & Poor's 500 index (^GPSC) fell 12.7 points, or 0.63 percent, to 1,989.63 and the Nasdaq composite (^IXIC) shed 48.44 points, or 1.04 percent, to 4,605.16.
The benchmark S&P 500 has declined 4.3 percent since peaking at an all-time high on Dec. 5.
In Europe, the FTSEurofirst 300 index of top regional shares fell 2.35 percent to close at 1,290.65 while MSCI's all-country world index, which measures stock performance in 45 countries, fell 1.22 percent to 403.74.
The broad STOXX 600 fell 2.2 percent in Europe, and has dropped 7.9 percent over the past six sessions, wiping out about $710 billion in market capitalization.
"The drop in oil would normally be good news for the European economy, but in this case it's actually bad news because it seriously raises the risk of deflation," said Christian Jimenez, fund manager and president of Diamant Bleu Gestion in Paris.
MSCI's emerging markets index fell 1.7 percent, with Brazil's Bovespa index off 2.1 percent and Mexico's bolsa index down 3.3 percent.
Brent crude hit a five-year low near $60 a barrel before paring losses, settling down 79 cents at $61.06. U.S. crude for January settled down $1.90 at $55.91, a price last seen in May 2009.
Growth worries have supported bets the Federal Reserve might consider keeping its pledge to leave U.S. short-term interest rates near zero for a "considerable period" in its latest policy statement at the end of a two-day meeting on Wednesday.
The price on benchmark 10-year Treasury notes fell 4/32 in price, pushing the yield up to 2.1182 percent.
The euro was last down 0.21 percent against the dollar at $1.2434. The dollar was 0.90 percent lower against the yen at 117.70 yen.
-With additional reporting by Rodrigo Campos.
What to watch Tuesday:
Federal Reserve policymakers begin a two-day meeting to set interest rates.
The Commerce Department releases housing starts for November at 8:30 a.m. Eastern time.
These selected companies are scheduled to release quarterly financial results:
Market Wrap: Stocks Extend Slide as Oil Slumps Further
If you don't already have one, now's the time to establish a traditional individual retirement account or a Roth IRA, and if you're self-employed, a Solo 401K or SEP-IRA. Don't worry if you don't have enough money to fully fund the account. As long as you establish the account by the end of the calendar year, you'll be able to retroactively contribute to it through April 15 of next year, and those funds can still count toward your 2014 taxes.
For 2014, you're allowed to contribute up to $17,500 to your 401(k). (If you're 50 and over, that limit increases to $23,000.) This is the maximum you're able to save per year and still defer paying income tax on that money.
Since 401(k) contributions must be made through payroll deductions, talk to your company's payroll department about adjusting your December contribution or adding a lump-sum amount from your holiday bonus when you receive it. Also, chat with your human resource department to see if it will let you retroactively earmark contributions made prior to April 15, 2015 for the 2014 tax year.
If you're age 70½ or older, you're required to take a certain amount from your 401(k) and traditional IRA each calendar year. If you don't, you could be facing sizable penalty fees from the IRS (as in 50 percent of the amount you should have taken out). To find out how much you should take out by the end of the year, talk to your financial adviser or see this calculator.
You may qualify for a state income tax deduction by contributing to your children's 529 college savings plan.While every state's 529 tax deduction rules and contribution limits vary, most states will accept contributions until all account balances for the same beneficiary reach $235,000 to $412,000. Check with your state to discover your specific limits.
Depending on your financial situation, converting some of the funds from your traditional IRA into a Roth IRA could be a smart strategy. You're able to withdraw the funds from a Roth IRA tax-free, and Roth IRAs are excluded from required minimum distribution rules. Furthermore, if you're ineligible to contribute to a traditional or Roth IRA due to income limitations, you can still contribute to a "nondeductible" traditional IRA and then process what's known as a "backdoor" Roth conversion.
When you sell stocks for a gain, you face capital gains taxes. But you can counterbalance these gains by selling some of your "losing" stocks and writing off the losses. Talk with your accountant about whether this strategy would work for you; if it will, you need to harvest your losses before the year closes out.
Do you have a flexible spending account, or FSA, at work? Check the detail of your company's policy; many are "use it or lose it," meaning if you don't use the full amount in your FSA by year's end, that money will not roll over.
New federal laws permit employers to let their workers roll over a maximum of $500, but it's the employers choice whether or not to allow this rollover. Also, some employers give their workers a grace period until March of the following year to use the prior year funds, while other employers require that the funds are used by Dec 31. Check with your HR department to learn your employers' rules.
Remember that FSA funds can be used for a lot more than just prescriptions and co-pays. If you have money you need to spend before it's gone, you may also be able to use it for things like dental work, glasses or contact lenses, and even some qualified over-the-counter medicine and supplies.
Secure some additional tax deductions for 2014 by donating to a charitable cause. As long as you itemize your donations, you can claim everything from cash donations to goods to used vehicle donations. You can even give some of your stock to charity, thus avoiding capital gains tax.
Just be sure to get a signed and dated receipt from the charity, noting the amount of your contribution -- especially if you're donating goods instead of cash. As an added precaution, take photographs of any high-value donations (over $250).
You may qualify for another tax credit by making energy-efficient home improvements like windows, insulation and roofing. You'll also save more in the long run on your home's heating and cooling costs. To see which improvements qualify for a tax credit, go to the federal government's energy savings website, which lists comprehensive details that are broken down state-by-state.
If you need to enroll for coverage on the healthcare exchanges, you have until Dec. 15, 2014 to sign up for coverage that begins on Jan. 1, 2015. If you're already enrolled in a marketplace plan, you may be able to change your coverage if you've had a qualifying life event, such as a marriage or a move to another state.
You can give up to $14,000 to individuals per year without needing to file a gift tax return. If you're married, you and your spouse can each bequeath gifts of $14,000 to an individual without triggering a taxable event. If you decide to give a major financial gift to your children, talk to your kids first about strong money-management skills. Here's a free guide to help to talk to your kids about money.
Giving a little bit each year can also help reduce your overall estate tax burden (although the estate tax exemption is $5.34 million in 2014, which means few taxpayers will need to worry about this).