Equities open down 7%; S&P 500 circuit breaker triggered

A crisis is brewing in equity markets Monday as indexes posted a sharp decline at the open.

The S&P 500 opened the week down 7% and trading was halted for 15 minutes as the selling pressure triggered a circuit breaker in the marketplace.

The Dow Jones Industrial Average is staring the week down more than 1,800 points, also dropping more than 7% at the North American open.

In an attempt to quell panic moves in the marketplace, equity indexes have “circuit breaker” levels where trading is halted after sharp declines. The first breaker triggers a 15-minute halt when markets decline by 7%. A second 15-minute break is triggered if prices decline by 13%. If markets decline by 20% then trading is halted for the rest of the day.

According to analysts, equity markets are reacting to a collapse in the oil market. Overnight oil prices saw their sharpest decline since 1991, dropping nearly 30%.

Not only is the oil market suffering from expected weak demand in a slowing global economy, but a price war is looming after OPEC nations and Russia were unable to agree on production cuts. In response to the breakdown in talks, Saudi Arabia slashed its official selling price and announced plans to raise crude production significantly.

The market volatility has been positive for gold prices, which pushed to a 7-year high overnight. Although prices are off their highs at the start of the North American trading session, they are still holding positive gains on the day.

April gold futures last traded at $1,679.90 an ounce, up 0.45% on the day.