An early rebound for oil and metals prices boosted energy and materials stocks, before oil futures turned decidedly lower and dragged the stock averages down. Southwestern Energy plunged 14 percent.
Advertisement
Investors sought refuge in bonds. Investors’ fears revolve around the risk that credit defaults in the energy sector spread across other industries as balance sheet adjustments among non-OPEC producers will be needed to stabilize oil prices….In all, the same negative narratives that have hurt stocks since this summer are playing out.
The trouble began with a report from the International Energy Agency that said the oversupply in oil would persist until late next year even as demand continues to weaken. At 9:37 a.m. ET (1437 GMT) the Dow Jones industrial average was down 229.5 points, or 1.31 per cent, at 17,345.25, the S&P 500 was down 24.31 points, or 1.18 per cent, at 2,027.92 and the Nasdaq Composite was down 52.82 points, or 1.05 per cent, at 4,992.36. The S&P 500 fell 22 points or 1.07% to 2,030. Hong Kong’s Hang Seng slipped 0.8 percent to 21,534.45 and mainland China’s Shanghai Composite Index lost 1.1 percent to 3,417.46.
Government bond prices rose sharply.
Despite analysts’ praise for the deal, shares of both fell: Dow Chemical ended 2.8 per cent lower and Dow member DuPont gave up 5.5 per cent. The Fed has said the raised rates would only be a small and gradual change, with experts saying around 0.25 percent. France’s CAC 40 shed 1.3 percent and Germany’s DAX lost 1.4 percent. Oil has been falling for 1 1/2 years and is now at its lowest level since early 2009. Recent economic reports indicate that the USA economy is healthy enough to withstand a rate hike.
FED FOCUS: Market attention will also be turning to next week’s crucial two-day Fed meeting that wraps up on December 16.
November retail stopped just short of expectations, rising 0.2% – better than October’s 0.1% gain but below views for 0.3%.
On the New York Stock Exchange, Dow members Chevron and ExxonMobil lost 3.2 percent and 1.8 percent, respectively, and Schlumberger fell 2.3 percent.
The sell-off gained ground ahead of the close as investors took profits on stocks such as Amazon.com, which had performed well this year, said Dennis Dick, head of markets structure at Bright Trading LLC in Las Vegas. Instead, it will invest in a semiconductor business that is owned by Dow Corning. The yield on the 10-year Treasury note fell to 2.17 per cent from 2.23 per cent on Thursday. The euro strengthened to $1.0967 from $1.0937.
Adding to that was another fall in China’s yuan, taking its loss against the dollar to one per cent this week as Beijing wrestles with a continued outflow of capital on its slowing economy.
Advertisement
In other energy futures market, Brent crude, the global oil benchmark, fell $1.80, or 4.5 percent, to $37.93 a barrel in London.
