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Oil regains hold on stocks; data to show if economy going into low gear

Personal income and spending and car sales will be important reports Tuesday for markets that are concerned the economy may be stuck in low gear.

But the biggest influence on stocks may be the direction of oil prices, which closed down nearly 4 percent Monday, briefly dipping below the psychologically important $40 per barrel level. West Texas Intermediate crude futures closed at $40.06.

"We broke the correlation with WTI and the S&P when we were in the $45 or $50 range. It's back. The biggest draw down we saw in the market today was when WTI went from being down 2 percent to being down 3 percent," said Art Hogan, chief market strategist at Wunderlich Securities.

Hogan said it will be key to see if oil goes back below $40 a barrel, a level it was last at in April. Energy analysts say it could fall into the mid-$30s or lower.

"$35 is the next target lower. I think if it got down to $35, you'd have people stepping in. The fundamentals are a lot better than they were at the beginning of the year. … I don't think anything with a $20 handle is in the cards," said Mike Dragosits, senior commodity strategist at TD Securities.

Oil is now down more than 21 percent from its June 8 high and has been falling on fears of a glut, not only for crude but for refined products. API inventory data is reported Tuesday afternoon.

Stocks ended mixed Monday, with the Nasdaq up...