A rout in crude oil prices hammers the stock market

[Jonathan Fairfield]

A rout in crude oil prices hammers the stock market

BERNARD CONDON, AP Business Writer

NEW YORK (AP) — A slump in oil prices sparked a global sell-off in financial markets on Friday with losses spreading from Asia to Europe to the U.S., where stocks fell sharply to cap their worst week since the summer.

The selling was broad, with all 10 sectors of the Standard and Poor's 500 index ending down. Fearful investors put their money in government bonds, especially U.S. Treasurys. Another measure of anxiety, the so-called Vix index, jumped. It is now up 70 percent in just five days.

Investors worry the sharp fall in the price of oil and other commodities is a sign of weakness in the global economy, especially China, and that will cut into profits at big energy producers and suppliers of raw materials as well as other companies.

"We're stockpiling commodities and demand is not picking up," said Tim Courtney, chief investment officer of Exencial Wealth Advisors. "It's kind of a depressing market."

Energy shares, already decimated this year, fell 3.4 percent on Friday. Southwestern Energy plunged 14 percent. Freeport McMoRan, a mining giant, dropped 6 percent.

The trouble began with a report from the International Energy Agency that said the oversupply in oil would persist until late next year even as demand continues to weaken. Benchmark U.S. crude plunged $1.14, or 3 percent, to close at $35.62 a barrel in New York. It has been falling for 1 ½ years and is now at its lowest level since early 2009.

By the end of the day, the S&P 500 index had lost 39.86 points, or 1.9 percent, to 2,012.37. It was down 3.8 percent for the week, its worst showing since August.

The Dow Jones industrial average lost 309.54 points, or 1.8 percent, to 17,265.21. The Nasdaq composite declined 111.71 points, or 2.2 percent, to 4,933.47.

In Europe, Germany's DAX lost 2.4 percent, Britain's FTSE 100 dropped 2.2 percent and France's CAC 40 shed 1.8 percent.

Investors were also rattled by trouble in a risky corner of the credit markets where bonds from heavily indebted companies are traded. Their prices have fallen sharply as investors fear the companies that issued the bonds might default. A fund that tracks the bonds, the iShares iBoxx USD High Yield Corporate Bond ETF, has dropped nearly 4 percent in five days.

Investors are also focused on a Federal Reserve meeting next week where the central bank is widely expected to announce an increase in its benchmark interest rate from a record low.

Recent economic reports indicate that the U.S. economy is healthy enough to withstand a rate hike, but investors are still nervous because it would be the first rate rise in nearly a decade.

"It's anticipation of the Fed, it's oil, it's credit ... all of these factors are putting fear and confusion into the investor," said Jonathan D. Corpina, senior managing partner at Meridian Equity Partners.

In a sign of trouble among commodity producers, Dow Chemical and DuPont on Friday announced a $130 billion deal to merge their businesses to counter falling prices. Their stocks had risen in previous days on reports the deal was forthcoming, but fell sharply on Friday.

Dow Chemical dropped $1.54, or nearly 3 percent, to $53.37. DuPont lost $4.11, or 5.5 percent, to $70.44.

In Asia, Japan's Nikkei 225 index climbed 1 percent, but most other major indexes fell. Hong Kong's Hang Seng dropped 1.1 percent and mainland China's Shanghai Composite lost 0.6 percent.

Among stocks making big moves:

— Software maker Adobe Systems rose $2.46, or 2.8 percent, to $91.42 after reporting earnings in its latest quarter that exceeded analysts' expectations. The stock is up 26 percent since the start of the year.

— Corning rose 99 cents, or 5.6 percent, to $18.68 after the company said it will give up its stake in Dow Corning, a joint venture with Dow Chemical. Instead it will invest in a semiconductor business that is owned by Dow Corning.

U.S. government bond prices rose sharply. The yield on the 10-year Treasury note fell to 2.12 percent from 2.23 percent late Thursday, a big move. The dollar fell to 120.79 yen from 121.64 yen. The euro strengthened to $1.0995 from $1.0939.

Precious and industrial metals futures closed mixed. Gold edged up $3.70 to $1,075.70 an ounce, silver fell 23 cents to $13.88 an ounce and copper rose four cents to $2.12 a pound.

In other energy futures market, Brent crude, the international oil benchmark, fell $1.80, or 4.5 percent, to $37.93 a barrel in London. In New York, heating oil plunged eight cents, or 6.5 percent, to $1.146 a gallon, wholesale gasoline was little changed at $1.282 a gallon, and natural gas lost 2.5 cents, or 1.2 percent, to $1.99 per 1,000 cubic feet.

-- (c) Associated Press 2015-12-12

[GOLDBUGGY]

Maybe it has more to do with the extra 3 million bbl / day the Saudis are pumping out and selling, then signs of a week economy. Nobody is buying because all the storage tanks are full of cheap oil, but yet they keep producing.

Seems a bit crazy to me. The Saudis may be selling more oil but they are making far less money then before and are digging into there Oil Funds now just to pay there bills. So what if they slow down or stop expensive oil. The Technology and Oil Reserves will still be there. As soon as the Oil price goes back up they will be in business again.

Or do they really expect the likes of Russia and the United States to sit down at there OPEC Table and agree to there oil production quotas and cut production? Russia couldn't do this even if they wanted to and I am sure both countries don't want to follow there lead. Not allowed in a Free Market Economy anyway.

Maybe it is time to knock Saudi Arabia off its high horse at OPEC and embargo all Saudi Oil. Let them turn in there Air-conditioners and go back to sleeping in tents in the desert. We have enough Oil without them and we certainly don't need them meddling in politics and setting the price of oil whenever they fee like it. Oil can't be traded freely on supply and demand when they are at the plate and setting the price by over supply or under supply.

So it is time to get rid of OPEC. We did fine without them until they came along in the 70's, and we would continue to do fine without them. Set a fair price for oil then buy from selected members if need be. We don't need there Oil as much as we did in the 70's. At $80 / bbl the USA had enough oil to feed itself and even export again. Plenty of Tar Sand and Heavy Oil around to. .