Stocks Fall as Sliding Oil Prices Hit Energy Shares
February 02 2016 - 1:34PM
Dow Jones News
By Riva Gold and Leslie Josephs
U.S. stocks slumped Tuesday as oil prices resumed their slide
and some of the world's biggest energy companies posted
disappointing quarterly results.
The Dow Jones Industrial Average lost 306 points, or 1.9%, to
16143 in midday trading.
The slide followed a renewed slump in the price of oil, dragging
energy shares lower. Several large oil companies reported
disappointing quarterly results, signaling that even the energy
sector's most resilient companies are having trouble meeting the
sharply lowered expectations for the world's oil and gas
producers.
Exxon Mobil Corp. reported its l owest quarterly profit since
2002 and said it would suspend its stock-buyback program, sending
shares of the Dow component falling 2.6%.
U.K. oil giant BP PLC reported a sharp quarterly loss, sending
shares in the company down 8.7%.
U.S. oil prices fell below $30 and were recently off 5.2% to
$29.97 a barrel as hopes for a deal on production cuts faded.
Brent, the global benchmark, declined 3.9% to $32.91.
"The two-day decline in oil is starting to weigh on the price
action," said Michael Antonelli, equity sales trader at Robert W.
Baird.
The S&P 500 fell 1.9% and the Nasdaq Composite both slipped
2%.
The moves mark the latest slide for U.S. stocks this year, which
have been pummeled by diminishing expectations for global growth
and the deep slide in oil prices, which has hurt energy companies
but hasn't translated into a big uptick in consumer spending.
The S&P 500 is down 6.8% this year, while the Dow has lost
7.1%.
U.S. government debt rallied as investors sought assets
perceived as safe. Yields on the benchmark 10-year Treasury fell to
1.874%, the lowest intraday level since April 2015.
Steep declines in the oil price have hit equity markets hard
this year as investors fear it might signal slack in demand from
the world's largest energy consumers.
While low oil prices should boost consumer spending and help
companies save on costs, the underlying concern among investors is
whether the decline in oil prices and economic weakness in China
foreshadow a global recession, said David Donabedian, chief
investment officer at Atlantic Trust Private Wealth Management.
While Mr. Donabedian said he doesn't believe a global recession
is imminent, he expects stocks to struggle to regain traction in
the coming weeks given the persistent headwinds around China, oil,
and the corporate earnings season.
Despite a strong rally late last week "all of the same issues
that brought the [stock] market down in the beginning of the year
are still in play," said Bill Nichols, head of U.S. equities at
Cantor Fitzgerald.
The Stoxx Europe 600 fell 2.1%, with losses concentrated in the
energy and banking sectors.
Elsewhere, UBS Group reported a fall in fourth-quarter net
profit. Shares fell 6.8%.
"People are nervous about global growth," said Stephen
Macklow-Smith, head of European equities strategy at J.P. Morgan
Asset Management, noting many of the emerging markets that have
struggled this year are also large producers of raw materials.
Falling oil prices recently prompted Nigeria to request
emergency funding from the World Bank, while the Russian ruble fell
to its weakest ever level against the dollar this year.
Stocks in Asia ended mostly lower. Japan's Nikkei Stock Average
closed down 0.6%, while the commodity-heavy S&P ASX 200 fell 1%
after the Reserve Bank of Australia held interest rates steady as
expected.
The Shanghai Composite Index, however, climbed 2.3% after
China's central bank injected more liquidity into the financial
system ahead of the weeklong Lunar New Year holiday.
Alphabet reported a surge in profitability at its main Google
Internet businesses last year. Shares rose 3.7%, helping Alphabet
surpass Apple as the most valuable publicly traded company in the
world.
Gold prices fell 0.2% to $1125.30 an ounce.
Aaron Kuriloff and Leslie Josephs contributed to this
article.
Write to Dan Strumpf at daniel.strumpf@wsj.com
(END) Dow Jones Newswires
February 02, 2016 14:19 ET (19:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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