U.S. stocks plummeted on Monday, with the S&P 500 index closing down 7.6%, its worst day since 2008, capping two weeks of extreme volatility amid the spreading coronavirus epidemic.

The number of COVID-19 infections and deaths has continued to rise, prompting some countries to embrace further drastic containment measures. Additionally, Saudi Arabia cut its official crude selling price and announced plans to boost output, sending oil prices down by as much as 30% on Monday.

Major U.S. equity indexes are well into correction territory (that is, down 10% or more) and are close to entering a bear market, generally defined as a drop of 20% or more. At Monday’s close, the S&P 500 Index was down 18.9% from its recent peak, and the Dow Jones Industrial Average was down 19.3%.

“Contributing to today’s renewed plunge is the 30% crash in oil prices, courtesy of the disintegration of the OPEC+ alliance triggering an all-out price war between Russia and Saudi Arabia,” says Schwab Chief Investment Strategist Liz Ann Sonders. “From a recent high of nearly $63 last April, WTI (West Texas Intermediate) crude futures fell below $30 intraday this morning.”

Recession risk is rising

The fall in oil prices will have mixed effects, according to Schwab Chief Global Investment Strategist Jeffrey Kleintop.

“Importers such as China, Japan and India will be beneficiaries, but countries such as Canada and Mexico will be hurt,” Jeffrey says. “Earnings estimates for energy companies and the global averages—as well as jobs—will likely need to be cut, despite the benefit at the pump to consumers.”

Altogether, recession risk is on the rise, Jeffrey says. “It’s possible we are entering a global recession, but it’s too early to tell the magnitude,” he says.

Much will depend on the severity of new-case growth around the world, Jeffrey says. “In past pandemics, stocks didn’t bottom until global new-case growth stabilized,” he says. “While new cases outside China continue to rise, Chinese stocks have outperformed as domestic new-case coronavirus growth seems to have peaked.”