US Stocks Slip Due to the Continuing Slump of Crude Oil


Since Monday, US Stocks have been slipping due to a big slump in the price of oil. The market is keeping a close eye on the Wednesday’s Federal Reserve meeting. The Dow Jones Industrial Average plummeted around 0.2% or 27 points to 17254. The Nasdaq Composite Index went down 0.4% or 16 points to 4637 and the S&P 500 index went down 0.1% or 1 point to 2001.

In the afternoon trading was when US stocks decreased the worst brushing off big declines in European stocks and emerging markets. In these particular regions, investors were looking for safety while anticipating the Federal Reserve meeting later this week where increased short-term interest rates can be signaled through officials. Indonesia and Russia currencies were hit Monday as well as Thailand and Malaysia. There was a 5% slide as well last week when there was a 2.2% drop in Europe’s Stox 600.

While oil prices continued to bounce off session lows, the midday recovery came. At $56.58 a barrel, crude oil dropped 1.2% and fell as much as 3.3% before 12pm. In June, the price of oil slumped from their highs during slow economic growth and global oil surplus concerns which has hurt demand.

According to Brokerage Firm ITG’s head of sales (see all regulated binary options brokers here), Brian Fenske, correlated trade like this continues while the S&P tends to be connected with crude oil prices. When compared to other sectors, the energy stocks in S&P 500 did much better. Traders state that some of the better-performing positions were being cut back by investors reaching the end of year.

In the S&P 500, the worst performing was utilities. Despite the 0.6% decline on Monday, year-to-date, they are up 19%. In addition, despite the increased 33% for the year, the Nasdaq Biotechnology index was 1.7% down on Monday. The Jones Trading Institutional Service’s head of exchange traded fund trading, Dave Lutz feels that even though there is an increase in concern to the investors of how fast oil is declining, he does not think it is the cause of any huge equity angst. Profits are being made.

When it comes to energy companies, they are rising with Exxon Mobil Corp at a 1.1% gain and Chevron Corp at a 0.4% gain. The Dow industrials experienced their largest weekly loss last week since November 2011, when the Eurozone debit crisis shook markets. During this week, the S&P 500 declined the most since 2012.

In light of that, US stocks, despite the losses of last week, still remain 5% below their average all-time highs. Although some investors feel the resurgence in market volatility caught them off guard, they still believe the decline in the price of oil will after a while; benefit the US economy by reducing the price of gas and boost spending.

Investors will most likely focus on the Federal Reserve meeting being held later this week. Participants will be ultimately looking for a reaction to the weak inflation and downturn in the price of oil and any hints on interest-rate increases.

Page Updated: December 16, 2014