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Wall Street hit by Saudi attacks; energy stocks temper losses

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(Reuters) - U.S. stocks fell on Monday on global growth worries after weekend attacks on Saudi Arabia’s crude facilities hit 5% of the world’s supply, but a sharp surge in crude prices lifted beaten-down energy stocks and kept losses in check.

The attack on the world’s biggest oil exporter sent oil prices up more than 20% before they eased off their peaks as various nations said they would tap emergency reserves to ensure stable supplies. [O/R]

The S&P 500 energy .SPNY, one of the worst performing sectors so far this year, soared 3.15%, looking at its best one-day gain since Jan. 4. Shares of Apache Corp (APA.N), Marathon Oil Corp MRO.O and Hess Corp (HES.N) jumped between 10% and 13% and were the leading gainers on the benchmark index.

“The oil spike - higher prices globally - could slow world spending on items other than oil and that’s the main concern,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

Market spotlight shifted to the drone attacks from this week’s centerpiece, the U.S. Federal Reserve’s two-day monetary policy meeting where expectations of a quarter point interest rate cut remain high.

Anticipation of higher fuel costs drove down shares of airlines and cruise line operators with the S&P 1500 airlines .SPCOMALI shedding 2.20% while Carnival Corp (CCL.N) fell 2.8%.

Retail stocks .SPXRT lost 1.38% and were among the biggest drags on the S&P 500.

“The drone strike in Saudi has had an impact on how investors are looking at the security and stability of the global energy supply chain and is fueling a degree of risk reassessment,” said Peter Kenny, founder of Kenny’s Commentary LLC and Strategic Board Solutions LLC in New York.

Shares of defense companies Raytheon (RTN.N), Lockheed Martin Corp (LMT.N), Northrop Grumman Corp (NOC.N) rose at least 2%. J.P. Morgan upgraded Raytheon shares to “overweight”.

At 12:57 p.m. ET, the Dow Jones Industrial Average .DJI was down 151.30 points, or 0.56%, at 27,068.22, the S&P 500 .SPX was down 12.58 points, or 0.42%, at 2,994.81. The Nasdaq Composite .IXIC was down 32.63 points, or 0.40%, at 8,144.08.

Nine of the 11 major S&P sectors were trading lower.

Investors’ flight to safety pulled the U.S. benchmark 10-year Treasury bond yields US10YT=RR down from their multi-week highs, sending the interest-rate sensitive bank sub-sector .SPXBK 0.72% lower. [US/]

Wall Street's more than a decade-long rally continues to hinge on whether the Fed will keep cutting interest rates and on the progress in U.S.-China trade talks. The recent easing in trade tensions has brought the benchmark S&P 500 .SPX about 1% below its record high.

Among other movers, General Motors Co (GM.N) fell 4.1% after the United Auto Workers went on strike on Sunday, the first nationwide strike at GM in 12 years.

Advancing issues outnumbered decliners for a 1.09-to-1 ratio on the NYSE and a 1.18-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and one new low, while the Nasdaq recorded 41 new highs and 22 new lows.

Reporting by Medha Singh and Ambar Warrick in Bengaluru; Editing by Saumyadeb Chakrabarty, Arun Koyyur and Shounak Dasgupta

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