Dow plunges 391 points as fear grips markets -

Dow plunges 391 points as fear grips markets

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Traders work on the floor of the New York Stock Exchange in this file photo. (Credit: John R. Couglin/CNNMoney) Traders work on the floor of the New York Stock Exchange in this file photo. (Credit: John R. Couglin/CNNMoney)

The market freakout of 2016 keeps getting scarier. Cheap oil and China remain the major culprits.

The Dow dropped another 391 points on Friday, leaving the index down an incredible 1,437 points in just the first two weeks of the year. The S&P 500 lost 2.3% and the Nasdaq plunged 2.7% to its lowest level since October 2014.

The wave of selling dashes hopes that Wall Street's panic attack was over. The Dow had jumped 228 points on Thursday, its best day since early December.

"The sentiment is dominated by fear. Ahead of a long weekend, no one wants to be exposed," said Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ.

Friday's market slide was fueled by another crash in crude oil prices and China's stock market tumbling into a bear market. The U.S. stock market descended into some scary territory as well, with the S&P 500 briefly breaking below its August 24 low before rebounding above it.

"There's a mad rush for the exits! There is one direction to this trade in the immediate term: Lower," said Peter Kenny, an independent market strategist and founder of Kenny's Commentary.

Even the White House weighed in on the recent market turmoil. White House spokesman Josh Earnest said on Friday officials are closely watching market movements and their potential impact on the U.S. economy.

Stocks have moved almost in lockstep with the price of oil, which plunged another 6% on Friday to as low as $29.28 a barrel. That's the cheapest it's been since late 2003. Friday's plunge was fueled by signs that sanctions on Iran could be lifted as soon as this weekend, exacerbating the supply glut rocking the oil market.

While the oil plunge is great for many consumers because it lowers the price of gas at the pump, it's been a big negative for stocks lately. First, cheap oil eats into already-shrinking profits for energy companies. Many of the biggest losers on the S&P 500 on Friday were energy stocks, with Marathon Oil (MRO) and Consol Energy (CNX) plummeting 10% or more.

Secondly, the oil crash is raising fears that poor economic performance around the world is sapping demand. After all, oil demand is seen as a strong indicator of growth.

"Oil needs to stabilize. It seems misguided to conclude that equity prices will reverse course and trend upwards when the price of crude continues to trend lower," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

CNNMoney (New York)First published January 15, 2016: 9:29 AM ET

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