US stocks dropped with energy companies being slammed by the decline in oil prices and investors fretting about whether the sharp declines indicate a slowing economy.
The S&P 500 index dropped with the energy sector stocks leading losses. Materials and telecoms stocks dropped too.
On the Dow Jones Industrial Average, ExxonMobil Corp, Chevron Corp and Verizon were the top decliners.
Kristina Hooper, investment strategist at Allianz Global Investors said that the stock markets will remain volatile until the stabilization of oil prices.
Hooper was quoted by Market Watch as having said, “Investors have not made up their mind whether to attribute the fall in oil to oversupply or to demand issues and right now they are gripped with fear that the global economy is slowing and that the US is not immune to that.”
Oil prices, which have been down since the Organization of Petroleum Exporting Countries lowered the forecast for 2015 world oil demand said that non-OPEC supply would rise more than the forecast, dropped more after a surprise increase in supplies in the US.
Kim Forrest, senior portfolio manager at Fort Pitt Capital said that the fallout in domestic shale industry is beginning to spread to supplier firms and oil-field services.
Forrest said, “The energy sector still seems like a falling knife. But ultimately, consolidation in the industry will be good in the long-term, as stronger companies will be able to absorb weaker ones that have levered up tremendously during the boom years.”
She added, “While lower oil prices are supposed to be good for consumers, we will not know it for another six or more months.”
Bloomberg reported that the S&P 500 dropped 1.2% to 2,036. The benchmark gauge has dropped 1.9% the past three days after its December 5 record. The Dow Jones Industrial Average dropped 1.2% or 205.16 points to 17,596.04.
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