U.S. stocks finished firmly in negative territory Monday, as plunging oil prices walloped energy and materials stocks, partially undoing some of Friday’s big rally.

The S&P 500 SPX, -2.37% fell 14.62 points, or 0.7%, to close at 2,077.07. The Dow Jones Industrial Average DJIA, -1.92% fell 117.12 points, or 0.7%, to 17,730.51, but finished off its lows of the session after sliding more than 200 points earlier Monday. Monday’s downturn helped push the blue-chips gauge negative for the year, down 0.52%.

Meanwhile, the Nasdaq Composite COMP, -3.01% ended the session 40.46 points, or 0.8%, lower at 5,101.81.

Oil futures CLF26, plunged 5.8% to $37.65 a barrel, marking their lowest settlement in nearly seven years. This slammed shares of energy companies after the Organization of the Petroleum Exporting Countries’s decision on Friday to keep crude production running at current levels.

Read: Oil’s drop below $38 may cause a world of hurt for U.S. shale producers

The S&P 500 energy sector tumbled 3.6%, while all 40 stocks in the sector finished with sharp losses for the day. The top four decliners in the sector recorded double-digit declines: CONSOL Energy CNX, -0.09% sank 15%, Williams Companies, Inc. WMB, -4.32% and ONEOK, Inc. OKE, -4.40% shares declined about 13% each, while Devon Energy Corp DVN, -5.65% saw a more than 10% fall.

Oil has become the biggest bugaboo for investors, particularly after several recent high-profile defaults in the energy sector, said Brian Fenske, head of sales trading at ITG.

The global corporate default tally stands at its highest level since 2009, with the oil-and-gas sector accounting for 26% of all defaults. Also read: Deteriorating junk bonds flash warning signs for stocks

J.P. Morgan upgraded the energy sector to overweight from neutral on Monday. But for many investors “it still feels early to jump in while there’s no clear bottom for oil prices in sight yet,” said Jeff Carbone, managing director at wealth management firm Cornerstone Financial Partners.

The focus on oil comes as an interest-rate hike this month is considered a near certainty. The market is pricing in a 79% probability that the Fed will raise interest rates at next week’s meeting, in what would be the first hike in nearly a decade, according to the CME Group’s FedWatch tool.

On Friday, the S&P surged about 2% and the Dow jumped 2.1%, marking their biggest one-day advance in nearly three months. The gains followed a strong November U.S. jobs report. The two indexes scored weekly gains of 0.1% and 0.3%, respectively.

The S&P is going through a “period of backing-and filling” as it has had a “loss of short-term momentum since October’s impressive upmove,” said Katie Stockton, chief technical strategist at BTIG, in a note Sunday.

“Resistance remains intact at the all-time high near 2,135,” Stockton said, but added that “a breakout to new highs is attainable in the weeks ahead as positive seasonal forces take hold.”

The S&P’s uptrend line from the middle of October is now just below the index’s 50-day moving average, said Frank Cappelleri, Instinet’s executive director of institutional equities. Crude oil’s accelerated decline has kept the index from extending its push to new highs.

The S&P’s uptrend line (blue) from the middle of October is just below the 50-day moving average (green). Instinet

“Should things continue to leak lower over the next few days, it will be technically important for the S&P to hold above the pictured uptrend line,” Cappelleri added.

Economic news: Atlanta Fed leader Dennis Lockhart expressed strong support for hiking short-term rates off near-zero levels on Monday, in an interview with The Wall Street Journal.

Meanwhile, St. Louis Fed President James Bullard said that Fed forecasts, which kept the central bank from raising rates earlier, have been wrong over the last 18 months, during a speech at Ball State University in Muncie, Ind.

Bullard’s talk is expected to be the last speech by a Fed official before the central bank goes into a communication blackout ahead of its Dec. 15-16 meeting.

Individual movers: Keurig Green Mountain Inc. US:GMCR surged 72%, posting its largest one-day gain in its history, on news of a $13.9 billion buyout by JAB Holding.

Shares in Chipotle Mexican Grill Inc. CMG, +1.11% fell 1.5%, paring earlier losses after the burrito chain warned late Friday of a fourth-quarter sales drop in the wake of an E. coli outbreak. Also read: Analysts stay upbeat on Chipotle even as they lower short-term forecasts

Marvell Technology Group Lt. MRVL, -3.32% ended 1.6% lower, paring earlier losses after saying it is conducting an internal accounting probe.

Pep Boys-Manny Moe & Jack PBY, -1.23% finished up 2.4%, paring earlier gains, after activist investor Carl Icahn late Friday disclosed a 12% stake in the car parts retailer.

General Electric Co. GE, -2.24% shares fell 0.4% after the company said it has pulled the plug on the sale of its appliance business to Sweden’s Electrolux AB ELUX.B, +1.41% . The deal faced antitrust hurdles.

Vail Mountain Resorts Inc. MTN, +1.44% closed 2.9% higher after the operator of ski resorts before the open of regular trading posted a smaller-than-expected loss for its most recent quarter. Revenue topped forecasts.

Other markets:European equities SXXP, +0.55% stocks generally rose, though the FTSE XX:UKX was hit by its heavier weighting in oil and gas stocks. A key dollar index DXY, +0.04% gained about 0.4%, weighing on dollar-denominated commodities. Gold US:GCG6 ended lower.