Sliding oil prices keep socking Wall Street
NEW YORK - Falling oil prices pushed U.S. stocks down broadly on Monday, extending losses into a second week.
European stocks also fell, and the Russian ruble plunged to a record low against the dollar as the continuing collapse in the price of oil reverberated through global financial markets.
A brief rally after trading opened in the U.S. vanished as crude oil continued a six-month slide that has slashed its price nearly in half. Global demand for oil has been waning just as supplies are becoming more abundant.
Jack Otter, the editor of Barrons.com, joins Jeff Glor to discuss why oil prices have declined and what the broader implications for that will be...
The stock losses in the U.S. were modest, but markets in Germany and France fell more than 2 percent. The Russian ruble plunged, sending stocks sharply lower there, too.
The Standard & Poor's 500 fell 12.70 points, or 0.6 percent, to close at 1,989.63. All 10 industry sectors in the index dropped. The losses followed a 3.5 percent drop in the S&P 500 last week, its biggest decline since May 2012. The Dow Jones industrial average fell 99.99 points, or 0.6 percent, to end at 17,180.84. The Nasdaq composite lost 48.44 points, or 1 percent, finishing at 4,605.16.
"People are taking profits, and it can go on for a while," said Uri Landesman, president of Platinum Partners, an investment fund in New York. "You're seeing a mini-correction."
A solid report on U.S. manufacturers and some merger news helped jolt markets higher after the open, but the gains evaporated after an hour as crude prices fell. The oil slump is worrying investors because it hammers the profits of drillers and other oil companies that are big components in stock indexes. Investors also fear it may signal the global economic slowdown is deeper than expected.
The ruble sank 13 percent to 65.83 to the dollar. The Russian currency started the year at 32.85 to the dollar. The falling price of oil, a chief source of Russian exports and tax revenue, has weighed heavily on the ruble.
Several commentators have noted that plunging oil prices could eventually help U.S. stocks because it pushes down gas prices, freeing up money for Americans to spend at stores.
Doug Cote, chief market strategist at Voya Investment Management, said investors have overreacted to the oil drop and that he expects stocks to rise.
"Every time the consumer goes to the gas pump, it feels fantastic," he said. For the middle class, "it's like getting a big tax cut."
Investors may get a better sense of just how much oil is helping consumers when the Federal Reserve concludes a two-day meeting on Wednesday. The central bank statement summarizing its conclusions from such policy setting meetings can move markets. Investors will be looking to see if the statement keeps two key words: "considerable time," a reference to how long the Fed plans to keep short-term interest rates near zero.
Those low rates are widely credited with helping stocks race higher in the nearly six-year bull market. Most economists think the Fed will wait until June to raise rates.
In economic news, U.S. manufacturing output in November surpassed its pre-recession peak as auto production ramped up. The Federal Reserve figures are an encouraging sign that America's factories are somewhat insulated from the global economic slowdown.
Among stock making big moves:
- Riverbed Technology (RVBD), a maker of computer-network equipment, jumped $1.57, or 8.4 percent, to $20.31 after agreeing to a $3.6 billion sale to private-equity firm Thoma Bravo and a Canadian pension fund.
- Pet supplies chain PetSmart (PETM) rose $3.30, or 4.2 percent, to $80.97 after announcing Sunday that it had agreed to an $8.7 billion sale to a group of investors led by BC Partners.
- Range Resources (RRC) jumped $1.22 or 2.3 percent to $55.40. The energy company, which is heavily focused on natural gas, said production would increase due to better efficiency. The company also said it was trimming its capital spending plans, becoming the latest energy producer to do so.
Prices for U.S. government bonds fell. The yield on the 10-year Treasury note rose to 2.11 percent from 2.08 percent late Friday.
Benchmark U.S. crude fell $1.90, or 3.3 percent, to close at $55.91 a barrel on the New York Mercantile Exchange. Oil was as high as $107 a barrel in June.
In other energy trading, Brent crude, a benchmark for international oil used by many U.S. refineries, fell 79 cents to close at $61.06 in London. In New York, wholesale gasoline fell 2.1 cents to close at $1.576 a gallon, heating oil fell 1.4 cents to close at $2.002 a gallon and natural gas fell 7.6 cents to close at $3.719 per 1,000 cubic feet.
Precious and industrial metals futures fell. Gold declined $14.80 to $1,207.70 an ounce. Silver fell 49 cents to $16.56 an ounce, and copper lost six cents to $2.88 a pound.
More details on: cbsnews.com