US STOCKS-Wall St drops after Saudi attacks; energy stocks limit losses

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 jump 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 easing as various nations said they would tap emergency reserves to ensure stable supplies. The S&P 500 energy, one of the worst performing sectors so far this year, soared 2.36%. Shares of Apache Corp , Marathon Oil Corp and Hess Corp jumped between 8.8% and 10.1% 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. American Airlines Group Inc , Delta Air Lines Inc and Carnival Corp fell between 2.2% and 5.1%. Investors' flight to safety pulled the U.S. benchmark 10-year Treasury bond yields down from their multi-week highs, sending the interest-rate sensitive bank sub-sector down about 0.6%.

Shares of defense companies Raytheon, Lockheed Martin Corp, Northrop Grumman Corp rose between 1.1% and 2.6%. J.P. Morgan upgraded Raytheon shares to "overweight". At 11:34 a.m. ET, the Dow Jones Industrial Average was down 133.39 points, or 0.49%, at 27,086.13, the S&P 500 was down 10.50 points, or 0.35%, at 2,996.89. The Nasdaq Composite was down 24.42 points, or 0.30%, at 8,152.29.

Nine of the 11 major S&P sectors were trading lower. 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 about 1% below its record high.

Among other movers, General Motors Co fell 3.1% after the United Auto Workers (UAW) went on strike on Sunday, the first nationwide strike at GM in 12 years. Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE and a 1.14-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and one new lows, while the Nasdaq recorded 32 new highs and 17 new lows.

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