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US: Wall St stumbles as oil slumps again

Wednesday, February 24, 2016 - 07:08

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[NEW YORK] Wall Street stocks slid on Tuesday, hurt by pressure from a renewed drop in oil prices, undercutting momentum that had helped the market rebound from a sluggish start to the year.

The major US indexes closed down more than 1 per cent. Crude prices settled down more than 4 per cent as Saudi Oil Minister Ali Al-Naimi effectively ruled out production cuts anytime soon.

Equity markets this year have been tightly linked to the daily fluctuations of battered oil prices. Energy shares tumbled 3.2 per cent on Tuesday, leading declines among S&P sectors.

"The markets are really worried that we are missing something here, that the global slowdown may be more significant than we are recognising and that slowdown could be causing oil prices to drop, and commodities prices in general," said Tracie McMillion, head of asset allocation at Wells Fargo Private Bank in Winston-Salem, North Carolina.

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The Dow Jones industrial average fell 188.88 points, or 1.14 per cent, to 16,431.78, the S&P 500 lost 24.23 points, or 1.25 per cent, to 1,921.27 and the Nasdaq Composite dropped 67.02 points, or 1.47 per cent, to 4,503.58.

In a sign of the spreading toll from low oil prices, JP Morgan, the largest US bank by assets, will increase provisions for expected losses on energy loans by US$500 million, or more than 60 per cent of its existing reserves. Its shares dropped 4.2 per cent.

Financial shares, the worst performing group this year, fell another 1.8 per cent on Tuesday. Nine of the 10 S&P sectors finished negative.

After posting its strongest week of the year last week, the S&P 500 had climbed another 1.5 per cent on Monday. It remains down 6 per cent this year. "Having the market take a little bit of profit wasn't a surprise to us," said John Traynor, chief investment officer of People's United Wealth Management in Bridgeport, Connecticut.

"We think this is just a small setback in an ongoing recovery. We have been telling clients that we are in a bottoming process." Fitbit plummeted 20.8 per cent to US$13.08 after the wearable fitness device maker forecast profit below estimates.

Western Digital dropped 7.2 per cent to US$42.77 after it cut the price of its planned acquisition of rival US hard-disk maker SanDisk Corp by more than US$3 billion after losing a big investment from China's Unisplendour Corp Ltd . SanDisk fell 1.6 per cent.

Declining issues outnumbered advancing ones on the NYSE by 2,075 to 991, for a 2.09-to-1 ratio on the downside; on the Nasdaq, 1,924 issues fell and 858 advanced for a 2.24-to-1 ratio favoring decliners.

The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq recorded 23 new highs and 52 new lows.

About 7.1 billion shares changed hands on US exchanges, below the 9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

REUTERS

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