US Stocks Dip as Prices of Oil Drop

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US Stocks Dip as Prices of Oil Drop

US stocks declined on Tuesday as the renewed slide in prices of oil weighed on the energy shares and the International Monetary Fund lowered its growth forecasts for 2015 and 2016, though the move spurred hopes that central banks would take more aggressive policy stances to accelerate the improvement of the economy.

According to The Wall Street Journal, the Dow Jones Industrial Average declined 0.6% or 106 points to 17,403. The S&P 500 lost 0.5% or nine points to 2,010 while the Nasdaq Composite Index dropped 0.5% or 22 points to 4,613.

The stocks dropped on the heels of the drop in prices of oil. Crude oil futures dropped 4.4% to $46.96 per barrel, pressuring the energy stocks, which dropped 1%. Among the shares of oil and gas producers, Range Resources Corp dropped 4.9% and Denbury Resources Inc. dropped 7.6%.

The IMF projected a growth of 3.5% this year and 3.7% for 2016, with both forecasts dropping 0.3%. Advanced economies were advised by the IMF to maintain accommodative monetary policies to avoid an increase in interest rates since cheaper oil will increase the risk of deflation.

Portfolio manager at Kingsview Asset Management, Paul Nolte was quoted by Reuters as having said, “This absolutely raises the odds that we’ll see more central bank action. The upside to seeing less international growth is that it is now very unlikely the Federal Reserve will raise interest rates mid-year.”

The European Central Bank is expected to announce on Thursday, a bond buying program that will boost the flagging economy of the region. Nolte added, “If we don’t see something out of the ECB, that will really increase volatility.”

The Stoxx Europe 600 added 0.7%, Italy’s FTSE MIB climbed 0.9%, CAC 40 of France rallied 1% and the DAX Index of Germany dropped 0.2%.

Shanghai Composite Index, the Nikkei of Japan and Hong Kong’s Hang Seng Index advanced on Tuesday.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com