The Dow Jones Industrial Average capped the worst week since 2011, finishing with a 100-point lurch in the final half-hour of trading, as equities tumbled around the world after crude extended declines below $58 a barrel. Treasuries rose and the dollar fell on concern inflation is slipping.
The Dow fell 1.8 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index dropped 1.6 percent. The 30-stock gauge lost 3.8 percent for the week while the S&P 500 tumbled 3.5 percent, its worst performance in more than two years. West Texas Intermediate crude lost 3.6 percent to $57.81 a barrel. The Stoxx Europe 600 Index capped a 5.8 percent slide for its worst week in three years. Brazil’s Ibovespa equity benchmark entered a bear market. Ten-year Treasury note yields dropped to an eight-week low.
“Clearly the oil situation is driving things,” Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service and Associates Inc., said in a phone interview. “At first it was just oversupply of oil. But now it’s that, plus fear of a world economy that’s growing too slow. Those fears are definitely outweighing the positive signs we’re seeing domestically.”
The selloff picked up speed in the final hour as the Dow plunged 100 points and the S&P 500 slid to 2,002.42 from 2,016.14, ending about 2 points above its average price for the last 50 days, a level monitored by technical analysts. At about 2:50 p.m., March futures on the benchmark gauge for U.S. equities slipped below 2,000 for the first time since Nov. 4.
Oil dropped 12 percent for the week, the 10th weekly slide since the start of October. The International Energy Agency cut its forecast for global demand in 2015. While the lower fuel prices hurts producers, that’s boosting demand for bonds as central banks in Europe and Asia maintain stimulus to fight deflation.
More than $1 trillion was erased from the value of global equities this week. Stocks around the world fell today, with after November Chinese factory production slowed more than estimated. The MSCI All-Country World Index lost 1.4 percent, extending a weekly rout to 3.8 percent, its worst since May 2012.
The Chicago Board Options Exchange Volatility Index, a measure of the cost of options on the S&P 500 known as the VIX, has jumped 78 percent this week, its biggest weekly rally in more than four years.
This week’s retreat in stocks mirrored a tumble in speculative grade credit. The iShares iBoxx High Yield Corporate Bond exchange-traded fund plunged 3.4 percent over the five sessions, the biggest decrease since 2012. The security lost 1.4 percent on Dec. 12, falling to the lowest level since June 2012.
Treasuries rallied, with benchmark 10-year yields sinking to the lowest since mid-October. The spread between Treasury 30- year bonds and five-year notes narrowed to as little as 120 basis points, its lowest level in almost six years as oil declines fueled demand for the longest maturities on bets inflation will slow.
U.S. equities briefly pared losses today as data showed Americans’ confidence rose in December to an almost eight-year high, pointing to a pickup in holiday-related purchases.
Data yesterday showed that retail sales rose 0.7 percent in November as consumers used some of the money saved at the gas pump to purchase electronics, clothing and furniture.
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