US stocks sink as oil shares tumble; Nasdaq -1.7%
Brendan Connolly works on the floor of the New York Stock Exchange, Wednesday, Dec. 10, 2014. U.S. stocks are opening modestly lower as indexes in Europe and China recover from a slump the previous day. AP
NEW YORK – US stocks tumbled more than 1.5 percent Wednesday as a pullback in petroleum stocks sparked a sell-off in the broader market.
The Dow Jones Industrial Average dropped 268.05 points (1.51 percent) to 17,533.15.
The broad-based S&P 500 sank 33.68 (1.64 percent) to 2,026.14, while the tech-rich Nasdaq Composite Index plummeted 82.44 (1.73 percent) to 4,684.03.
Beaten-down petroleum-linked stocks had another bad day as US oil prices sank to a fresh-five year low on a forecast by the OPEC cartel for lower demand for its oil in 2015.
Dow members ExxonMobil and Chevron skidded nearly 3.0 percent and 2.0 percent, respectively. Occidental Petroleum fell 3.0 percent and oil services company Weatherford International plummeted 7.0 percent.
Article continues after this advertisementInvestors are worried about the “unknown” of “how this decline in oil prices will affect other sectors of the economy,” said David Levy, portfolio manager at Kenjol Capital Management.
Article continues after this advertisementPeter Coleman, head of trading at Convergex, said lower oil prices are generally good for the US economy, but that the free-fall in commodity prices “makes people nervous.”
The S&P 500 volatility index, sometimes called the “fear index,” rose to its highest level since mid-October.
Wednesday’s sell-off was broad-based and swept up virtually all of the 30-stock Dow, including Boeing (-3.9 percent), Caterpillar (-2.6 percent) and Goldman Sachs (-2.5 percent).
Airlines outperformed other sectors as the International Air Transport Association predicted the sector’s profits would rise to $25 billion in 2015 from $18 billion in 2013, due in part to lower oil prices.
American Airlines rose 1.3 percent and United Continental jumped 1.9 percent, while Delta Air Lines dipped 0.2 percent.
Dow member JPMorgan Chase dropped 2.8 percent after the Federal Reserve said the largest US bank by assets would need $22 billion more in capital by 2019 to meet new capital rules for systemically important financial institutions.
Yum Brands, which owns KFC and other fast-food chains, fell 6.2 percent after saying its China division’s same-store sales for 2014 would be “negative mid-single digits” due to an unexpectedly slow recovery following a tainted-meat scandal involving a supplier.
Bond prices declined. The yield on the 10-year US Treasury fell to 2.17 percent from 2.22 percent Tuesday, while the 30-year dropped to 2.84 percent from 2.88 percent. Bond prices and yields move inversely.
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