Stocks closed sharply lower Monday, with the Dow Jones Industrial Average tumbling 600 points as crude oil prices extended their retreat while a firmer U.S. dollar also sparked worries about the competitiveness of U.S. corporations in an increasingly challenging economic environment.

Trading, however, was relatively active, as gauged by the number of shares changing hands, despite Veterans Day. The only major market to close in commemoration was the bond market.

The Dow Jones Industrial Average DJIA, -1.92% dropped 602.12 points, or 2.3%, to 25,387.18, the S&P 500 SPX, -2.37% fell 54.79 points, or 2%, to 2,726.22, while the Nasdaq Composite Index COMP, -2.73% declined 206.03 points, or 2.8%, to 7,200.87.

Preliminary trading volume hit 6.7 billion shares, slightly off from the year-to-date average of 6.9 billion shares, according to the Dow Jones Data Group.

What drove the market?

Representatives from Saudi Arabia over the weekend said that the kingdom would cut its oil production, while the Organization of the Petroleum Exporting Countries weighs a more sweeping reduction of output by members of the oil cartel.

West Texas Intermediate crude for December delivery US:CLZ8 has fallen for 11 sessions in row, finishing Monday below $60 a barrel for the first time since February.

A shock drop in oil prices has raised questions among investors about the health of the global market and investors will closely watch talk of cuts to crude production that could stabilize moves in the commodity, which entered a bear market, defined as a drop of at least 20% from a recent peak, last week.

Worries about oil’s effect on the market come as investors continued to fret about China and U.S. trade tensions, with President Donald Trump set to meet with Chinese President Xi Jinping later in November at the sidelines of the G-20 summit to discuss resolving their trade disagreements.

A rising dollar is also weighing on markets, as a rise in the greenback can hurt sales of multinational companies, making goods relatively more expensive to customers purchasing abroad.

What were strategists saying?

Michael Schoonover, portfolio manager at Catalyst Funds told MarketWatch that recent market declines suggest the partial deflation of a “passive investing bubble,” in which stock prices have been driven irrationally higher by a growing share of money invested in passive index funds and exchange-traded funds. ”We’ve seen generally low volume of late, which suggests that institutional money isn’t driving the market,” he said.

Because many passive index funds are weighted by market capitalization, massive companies like Apple Inc. and Amazon.com Inc. have been responsible for much of the market’s gains in 2018, creating a self-reinforcing cycle that leads to higher and higher valuations for the companies dominating the S&P 500, according to Schoonover. “Now we are seeing the inevitable repricing of stocks that were artificially boosted by flows into passive, low-fee products,” he said.

Craig Callahan, president and founder of Icon Advisors, said oil’s bear market has weighed heavily on the market in general, and energy exploration firms in particular, creating buying opportunities for value investors. “I’m considering adding to my holdings in the energy sector,” Callahan told MarketWatch.

“These firms have hedged the price of oil, and projections for 2019 [earnings-per-share] growth are 25% for the sector,” compared with just 9% for the S&P 500, Callahan said.



Which stocks were in focus?

Apple’s stock AAPL, -4.19% skidded 5% after Lumentum Holdings Inc. LITE, -3.00% cut its earnings and revenue outlook, saying it received a request from “one of its largest industrial and consumer customers for laser diodes for 3D sensing” to “materially reduce shipments” which is believed to be Apple. Meanwhile, J.P. Morgan analysts downgraded the stock.

General Electric Co. GE, -2.24% dropped 6.9%, falling 13 out of the past 14 sessions to close at $7.99 a share. The extended slide comes as J.P. Morgan analyst Stephen Tusa last week slashed his price target on the stock to $6 from $10, citing concerns over the conglomerate’s $100 billion in liabilities.

SAP SE SAP, -3.25% has agreed to purchase Qualtrics International Inc. for $8 billion in cash, the companies announced Sunday. The company’s stock slumped 6.4%.

Shares of Athenahealth Inc. US:ATHN jumped 9.7% after the health-care services firm confirmed that it was being acquired by affiliates of Veritas Capital and Elliott Management Corp.’s Evergreen Coast Capital. The deal is worth $5.7 billion, and values the company at a 12% premium of $135 a share.

Shares of Abiomed, Inc. ABMD, -3.30% tumbled 17%, after the results of an FDA study into one of the firm’s heart-pump products disappointed investors.

Goldman Sachs Group Inc. GS, -2.87% skidded 7.5%, putting it on pace for its largest percentage loss in more than two years.

Shares of Aurora Cannabis Inc. ACB, -29.37% fell 4.5%, erasing earlier gains, despite the Canada-based cannabis company reporting fiscal first-quarter net earnings that rose to $105.5 million from $3.6 million a year ago.

British American Tobacco PLC BTI, +0.60% , Philip Morris International Inc. PM, -0.40% , and Altria Group Inc. MO, -1.60% stocks are extending their losses after The Wall Street Journal on Friday reported that the Food and Drug Administration was planning to propose a ban on menthol cigarettes. British American Tobacco shares shed 8.8%, Philip Morris stock declined 1.4%, while Altria stock has retreated 3.5%.

Shares of Pacific Gas and Electric Corp. PCG, -2.53% slid 17% as the electric utilities company continues to deal with the fallout of wildfires throughout California. The company has told California regulators one of its transmission lines suffered an outage at about the time a deadly wildfire still raging in Northern California started last week. The stock of another California-based electric utility, Edison International EIX, -2.22% , is down 12%.

Shares of Alibaba Group Holding Ltd.’s BABA, -0.85% fell 1.4%, not getting any help from data that showed that Chinese consumers bought $30.8 billion worth of goods in 24 hours on Singles Day, surpassing last year’s $25.3 billion.

How did other markets trade?

In Asia ADOW, -1.75% , major markets were lower while European indexes SXXP, -0.70% were also under pressure. The dollar, measured by the ICE U.S. Dollar Index DXY, +0.17% , was firmer and gold US:GCZ8 settled lower.

—Mark DeCambre contributed to this article