Stocks dragged down by energy. Oil drops below US$86
Wall Street's roller-coaster ride continuing for a third day on Thursday, with the Dow Jones industrial average plunging more than 300 points in midday trading. Gap's stock dropped after the company announced its CEO was retiring, and energy stocks fell sharply as the price of oil fell again.
The Dow Jones industrial average sank 312 points, or 1.8 per cent, to 16,681 as of 1:16 p.m. Eastern. The Dow has had three drops this year of 300 points or more. If stocks hold at current levels, it would be the Dow's fourth-biggest loss this year.
The bulk of Thursday's selling was happening in energy stocks, particularly in oil and coal companies, as the price of oil continued a multi-week decline. The energy sector of the S&P 500 fell nearly 3.5 per cent, far more than the rest of the market. Exxon Mobil and Chevron, the nation's two largest oil and gas companies, each fell three per cent.
Coal stocks were also taking a beating after Morgan Stanley analysts downgraded the entire sector.
The price of oil is plunging as concerns mount about slowing global economic growth while global oil production remains high. Benchmark US crude fell $1.60 to $85.69 a barrel on the New York Mercantile Exchange. Oil also dropped on Wednesday following news of lower global demand and high supplies.
Oil is now 20 per cent below its 2014 peak of US$107.26 a barrel, reached in late June. Brent crude, an international benchmark used to price oil used by many US refineries, was down US$1.17 to US$90.21 in London.
Triple-digit swings in the US stock market have become common in recent days. Just this week, the Dow jumped 274 points on Wednesday, which reversed a 272-point decline on Tuesday. Market watchers have been warning that the market was due for some more volatility after months of relative calm.
"There's a lot of cash on the side which wants to come back (into the market), but when you have big swings on alternative days like we are, folks are just not trusting the market," said Sal Arnuk, a partner at Themis Trading, in an email.
Traders also say the volatility may slow down once corporate earnings season gets fully underway. Aluminum company Alcoa reported its results on Wednesday, which beat expectations, but the bulk of S&P 500 companies will not report for another week or so.
"Everyone seems to be waiting for earnings season at this point," said Neil Massa, senior equity trader at John Hancock Asset Management.