US close: Stocks dragged lower by crude at five-year lows

The main US equity benchmarks ended the Monday session moderately lower, with all eyes tracking the fall in crude prices to five-year lows.

As of 21:15 front-month West Texas crude futures were trading off by 4.42% to $62.89 per barrel on the NYMEX.

Not surprisingly, by the end of trading the largest losses were to be seen in the following industrial groups: Exploration&production (-5.16%), Coal (-4.98%) and Pipelines (-4.33%).

However, the Dow Jones Industrials finished the day just 0.59% lower at 17,852.48 points, while the S&P 500 was to be seen 0.74% lower at 2,060.31.

The drop came despite the President of the Federal Reserve bank of Atlanta, Dennis Lockhart, reiterating his call for a “sensible approach” to tightening policy, which he described as being patient when starting the rate hike cycle and cautious about subsequent moves.

Correlations are dead. Long live correlations!

Mc.Donald’s retreated after posting a 2.2% drop in global like-for-like sales. When not adjusted for fluctuations in exchange rates, so-called system wide sales plummeted 6%. Sales in Latin America and Canada appear to have been a bright spot.

Cubist Pharmaceuticals rocketed after Merck announced its intention to purchase the firm for $8.4bn in cash or $102-a-share.

As an aside, Nick Colas, chief market strategist at ConvergEx, pointed out to CNBC how the correlation between the different asset classes had declined to a more than five-year low.

Reports of my (crude's) death have been greatly exaggerated

On Monday, Morgan Stanley lowered its forecast for the average price of Brent oil next year to $70 from $98, saying it expected it to trough in the second quarter, at $57.

However, "estimates of the oversupply are vastly overstated vs. true crude balances. The market may find balance as early as the second half of 2015 through demand stimulation, slower US production growth and/or an outage," the broker added.

In parallel, The Wall Street Journal reported that Chinese lenders were pressing the country's central bank for a reduction in their reserve requirement ratios.