Sun | Jan 21, 2018

Oil price dips again, stocks sink alongside commodities

Published:Wednesday | December 9, 2015 | 12:00 AM
In this December 17, 2014, file photo, oil pump jacks work behind a natural gas flare.

United States stocks fell for a second day on Tuesday following a wave of selling abroad on fears that a slump in commodity prices was far from over.

A big focus for investors - oil - slid again. After dropping for one and a half years, US benchmark crude now costs just US$37.51 a barrel, a near seven-year low.

"The energy sector has done a good job grappling with mid-US$40 oil, but it's tougher as you go under US$40," said Doug Cote, chief market strategist at Voya Investment Management. "The energy sector is having trouble adapting."

The Dow Jones Industrial Average lost 162.51 points, or 0.9 per cent, to 17,568. It was down 245 points earlier in the day. The S&P 500 gave up 13.48 points, or 0.7 per cent, to 2,063.59. The Nasdaq composite slipped 3.6 points, or 0.1 percent, to 5,098.24.

The selling began in Asia on disappointing trade figures from China, then spread to Europe, where stock indexes in Germany, France and Britain each dropped more than 1 per cent. In the US, stocks fell sharply in the morning, but later made back much of the losses.


Still, the selling was broad, with nine of the 10 sectors of the Standard and Poor's 500 index closing down. Suppliers of raw materials fell the most, down 1.9 per cent. Energy companies dropped 1.5 per cent.

In Asia, Chinese customs data showed exports from the world's second-largest economy contracted 6.8 per cent in November, worse than October's 3.6 per cent fall. Imports dropped 8.7 per cent.

Mining stocks in particular were slammed because China is a major importer of raw materials, accounting for as much as 50 per cent of global demand, according to consultants PwC.

John Manley, chief stock strategist at Wells Fargo Funds, said raw-material suppliers ramped up production too much a few years ago as China stoked its economy after the global financial crisis.

"It surprised producers that China was soaking up so much," Manley said. "As China slows and shifts to more consumer growth, these producers have been hit."

Iron ore, which is off 43 per cent since the start of 2015, fell again Tuesday when it shed 15 cents to close at US$39.25 a metric tonne. Copper inched up less than a penny to $2.05 a pound. It is down 29 per cent this year.

- AP