Wall Street drops on oil price crash, earnings anxiety; Dow falls over 1%

US stocks headed lower on Monday following a strong two-week rally as oil prices crashed, while investors turned cautious over what is expected to be a disappointing week for earnings and economic data.

Energy stocks shed 1.9% and were on track for their sixth slide in seven sessions as the front-month May US West Texas Intermediate (WTI) contract plunged more than 50% to its lowest price on record on storage concerns.

Although energy stocks have far smaller weightage on US equity indexes when compared with technology or financial shares, the sheer drop in oil prices underscores the decline in global growth as demand dries up, analysts said.

"This could be a concern for investors who were expecting a V-shaped recovery on the economic front," said Dan Russo, chief market strategist at Chaikin Analytics.

"Oil prices tend to be a gauge for the health of the global economy. It's difficult to be bullish on global economic growth with oil prices at multi-decade lows.

"Losses on the Nasdaq were limited, supported by gains in Amazon.com Inc and Netflix Inc - deemed "stay-at-home" stocks as widespread lockdowns fueled demand for online streaming and home delivery of groceries.

S&P 500 firms have recovered about 30% - or $5.8 trillion in market value - since a March trough on a raft of global stimulus and hopes the virus was nearing a peak in the United States.

But the benchmark index remains about 15% below its all-time high and analysts have warned of a deep economic slump from the halt in business activity and millions of layoffs.

US jobless claims touched 22 million in the four weeks to April 11, and analysts have forecast as many as 5 million more in the latest week. A reading of an April US manufacturing survey, also due Thursday, is expected to slide to recession-era levels.

Shares of United Airlines fell 4.1% after it warned of a $2.1 billion pretax loss in the first quarter. Delta Air Lines Inc is scheduled to report later this week, while Southwest Airlines Co has delayed its results to April 28 from April 23.

Overall, analysts expect earnings for S&P 500 firms to fall 13.5% in the first quarter, according to IBES data from Refinitiv, while Goldman Sachs has predicted share buybacks will halve and dividends will slide 23% in 2020.

At 13:21 p.m. ET the Dow Jones Industrial Average was down 313.63 points, or 1.29%, at 23,928.86, the S&P 500 was down 23.21 points, or 0.81%, at 2,851.35 and the Nasdaq Composite was down 8.55 points, or 0.10%, at 8,641.59.Most declines by midday were led by defensive stocks such as utilities and real estate, which fell more than 2% each.

"So people are looking to rotate out of names that they don't think will recover when the market does turn. A lot of money was hiding in utilities and defensive and now they're starting to peek their head out," said Rich Steinberg, chief market strategist at Colony Group.

International Business Machines Corp is expected to report first-quarter earnings after markets close on Monday.

Declining issues outnumbered advancers for a 2.08-to-1 ratio on the NYSE and for a 1.02-to-1 ratio on the Nasdaq.The S&P index recorded nine new 52-week highs and no new low, while the Nasdaq recorded 36 new highs and 10 new lows.