Huge Slides On Wall Street Today
Stock prices have tumbled on Wall Street today, erasing well over 1% of the value of the leading US stock indices.
By Peter Martin
Tuesday, January 6, 2015 - 00:00
The declines were led by energy stocks which are suffering from the bear market in crude oil. Energy prices were sharply lower again today: US light crude oil futures plunged 5% to $49.95 by mid-afternoon in New York, the first time the contract has fallen below $50 a barrel in five and a half years, as fears mounted that demand cannot keep up with swelling supplies.
Oil supply threatens to flood market
Oil output in Russia surged to a post-Soviet high of 10.7 million barrels a day last month, an increase of 0.3%, according to data released at the end of last week by the Russia’s Central Dispatching Department of Fuel Energy Complex (CDU TEK), while a spokesperson from the Iraqi Oil Ministry said that Iraq exported 2.9 million barrels a day in December and is aiming to increase that to 3.3 million this month. Iraq is the second-largest oil producer in OPEC.
US production, meanwhile, rose last week to the highest level since the Energy Department started collating weekly data. Overall, global supply of oil is looking very strong and the market is reacting to the fundamentals.
With the oil price yet to have found a bottom judging by today’s drop, oil producers in the Dow Jones have taken a hammering. Exxon Mobil ($XOM) fell 2.8% to $90.30 a share, while Chevron plummeted 3.7% to $108.20. The Dow Jones itself dropped 325 points or 1.82% to 17,508, while the losses were just as sharp for the more broad-based S&P 500 Index, which declined 39 points or 1.90% to 2018.9.
There has been little in the way of macroeconomic reports today to help steady the ship, though auto sales for December have been strong, an apt end to a resurgent year for the industry. General Motors reported a 19% leap in sales last month, while Fiat also announced double-digit sale growth and Chrysler achieved its best December in a decade. December is typically a strong month for car and truck sales though, a time when manufacturers offer price incentives to clear out older stock in order to make way for incoming models for the new year and despite the healthy growth, sales figures were on the light side of expectations.
The economic calendar is a lot livelier for the rest of the week. Tomorrow we have reports from the services sector for December from Markit and the ISM and factory orders for November, which offers the most complete data for the manufacturing sector. On Wednesday the Fed releases the minutes from last month’s FOMC meeting and the highlight of the week is Friday’s Employment Situation report, always closely watched by market participants.
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