Wall Street Declines as Oil, Energy Find Firmer Footing
U.S. stocks extended Monday's equity-market slide to Tuesday as global oil prices continued to trade near levels unseen since the depths of the financial crisis.
The Dow Jones Industrial Average was down 160 points, or 0.90% to 17570. The S&P 500 slipped 13 points, or 0.64%, to 2063, while the Nasdaq Composite shed 3points, or 0.07% to 5098.
Health care was the only sector in positive territory, while materials and industrials declined the most.
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After dropping more than 5% in the prior session, global crude prices suffered another round of declines early on Tuesday, hitting a fresh February 2009 low. However, prices recovered later in the session as traders began to view oil as oversold.
The steep declines come after OPEC, or the Organization for Petroleum Exporting Countries, opted last week not to cut production, but instead rev up output, adding to the one to two million barrels in excess supply, despite the growing supply glut as producers around the world play chicken with the prices.
"This means that prices will have to fall to the level that corrects the imbalance of supply and demand, which could take the combination of $30 dollar oil and six more months for existing hedges to roll off for the higher cost producers," Jack Mullen Director of Derivatives and Market Strategy at AgriBank, said.
West Texas Intermediate crude prices settled down 0.37% to $37.51 a barrel. Brent, the international benchmark, declined 1.15% to $40.26.
The plunging prices put severe downward pressure on a slew of energy names, after sending a dozen of them to fresh 52-week lows on Monday. On Tuesday, some of the biggest decliners in the sector were Chesapeake Energy (NYSE:CHK), Marathon Oil (NYSE:MRO), and Kinder Morgan (NYSE:KMI).
Elsewhere in commodities, gold prices ended down 0.01% at $1,076 a troy ounce. Silver dropped 1.51% to $14.09 an ounce, while copper gained 0.17% to $2.05 a pound.
Adding to the selling pressure, data overseas sent both Asian and European markets sharply lower. China recorded a worse-than-expected 6.8% drop in exports last month from the same time last year. It was the fifth-straight month of decline.
Meanwhile, data out of Japan showed the economy there didn’t actually enter into a recession in the third quarter. Annualized GDP figures showed a 1% increase over the period, revised up from a -0.8% preliminary reading, which came after second-quarter contraction.
The economic figures, coupled with oil’s continued decline sent major averages across the world lower. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, dropped 1.73%, while the German Dax shed 1.95%, the French CAC 40 declined 1.57%, and the UK’s FTSE 100 shed 1.42%. Markets in Asia ended lower: China’s Shanghai Composite index dropped 1.89%, while Hong Kong’s Hang Seng declined 1.34%, and Japan’s Nikkei slid 1.04%.
“This snippet of good economic data…has not been enough to prevent the Nikkei selling off and that negative trend has been picked up on by European traders as a sea of red covers all the major European equity indices,” Alastair McCaig, IG market analyst, said in a note.
In currencies, the U.S. dollar gave up some ground after gaining strength in the prior session. While the euro rose 0.33% against the dollar, the greenback declined against a basket of global currencies. The yield on the 10-year U.S. Treasury bond declined 0.005 percentage point to 2.22%. Yields move in the opposite direction of prices.
In corporate news, shares of Chipotle (NYSE:CMG) dropped more than 4% in early action after 30 students from Boston College, it was announced after the bell Monday, were sickened after eating at the fast-casual restaurant. The company has been working to track down the source of an E. coli outbreak first identified in Seattle and Portland at the end of October, and said the business would take a significant hit in the fourth quarter – amounting to between an 8% to 11% drop in 4Q comp sales.
Lawmakers on Capitol Hill probed the effects to both the beer market and consumers from a planned $108 billion merger between Anheuser Busch InBev (NYSE:BUD) and SABMiller on Monday. If approved by regulators, the tie-up would be one of the biggest deals of 2015, and create a brewing behemoth that controls about 30% of the world’s beer market.