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December 13, 2017
Friday, December 12, 2014

Oil slump leads Wall Street to worst week in 2-1/2 years

US stocks fell sharply, leaving the benchmark S&P 500 with its worst weekly performance since May 2012, as investors pulled back from the markets in response to oil's free-fall and more weak data out of China.

Oil's declines have underscored concerns about global demand, and with the S&P 500 having hit a record high only last week, investors were loath to fight the downward pressure on stocks, which accelerated in the final minutes of trading. The S&P dropped 3.5 percent on the week after seven straight weeks of gains.

The S&P energy sector was down 2.2 percent on the day. It is down 16.5 percent this year, the worst performing of 10 S&P sectors. Dow components Exxon Mobil and Chevron Corp both hit 52-week lows as US crude oil fell below $58 a barrel, hitting five-year lows, on expectations of reduced worldwide energy demand.

The Dow Jones industrial average fell 315.51 points, or 1.79 percent, to 17,280.83, the S&P 500 lost 33 points, or 1.62 percent, to 2,002.33 and the Nasdaq Composite dropped 54.57 points, or 1.16 percent, to 4,653.60.

Disappointing data that suggested China's economy softened in November pushed the materials sector down 2.9 percent, making it the worst-performing S&P sector on the day.

The drop in oil and weakness in China overshadowed strong US consumer sentiment, which hit an eight-year high.

Some investors hope declining gas prices will boost consumer spending enough to offset the energy sector's woes.

However, there is concern that rising volatility in the energy market will migrate to equities as investors worry about slack demand worldwide. The CBOE Volatility Index, or VIX, rose 5 percent to 21.08 on Friday as investors paid up to hedge against losses.

Adobe Systems rose 9 percent to $76.02, making it the biggest gainer on the S&P 500 after it announced plans to buy stock photography company Fotolia, along with a stronger quarterly report.

Declining issues outnumbered advancing ones on the NYSE by 2,468 to 647, for a 3.81-to-1 ratio on the downside; on the Nasdaq, 1,949 issues fell and 790 advanced for a 2.47-to-1 ratio favoring decliners.

The broad S&P 500 index posted 15 new 52-week highs and 35 new lows; the Nasdaq Composite recorded 52 new highs and 160 new lows.

About 7.6 billion shares were traded on US exchanges on Friday, compared to the 6.9 billion daily average so far this month, according to BATS Global Markets data.

European shares tumbled and posted their biggest weekly loss since mid-2011 as a relentless slide in crude oil prices pounded the European energy sector.

The broad STOXX Europe 600 index has lost 5.8 percent during the week, representing a wipeout in market capitalisation of roughly $524 billion, more the size of Norway's annual GDP.

Oil fell to fresh lows not seen since mid-2009 on Friday with Brent crude slipping below $62 a barrel while US crude fell below $58 on mounting worries over a global supply glut and weak demand.

Saipem dropped 5.6 percent, hitting a 10-year low, while Royal Dutch Shell lost 3 percent, and Repsol retreated by 6 percent. Crude has dropped nearly 50 percent since June, forcing a number of European oil services companies including Seadrill and Fugro to scrap dividends as oil majors have accelerated cost-cutting.

The STOXX oil and gas index, losing 3.6 percent, has plummeted 30 percent since June. The sell-off has erased roughly $300 billion from market capitalisation of the sector.

The FTSEurofirst 300 index of top European shares ended 2.6 percent lower on Friday at 1,321.73 points, wiping off nearly all its gains of 2014. The benchmark index is now only up 0.4 percent in 2014.

Shares in companies with a strong exposure to Russia also took a beating on Friday as the Russian rouble dropped to a new low of almost 58 to the dollar. The rouble has hemorrhaged more than 40 percent against the dollar since the beginning of the year, hurt by the slide in oil and risk aversion to Russian assets fuelled by Russia's stand-off with the West over the crisis in Ukraine.

Greece's political crisis has also been weighing on market sentiment this week, with Athens's ATG stock index sinking nearly 20 percent since last Friday.

Investors have been rattled by a decision by the Greek government to bring forward to next week a presidential vote that will force nearly two dozen independent lawmakers to decide whether to side with Prime Minister Antonis Samaras' pro-bailout cabinet, or with leftist radicals who have vowed to tear up the bailout. Failure to elect a president triggers early elections, which opinion polls show Syriza is likely to win.

Speculation of an imminent credit downgrade of France by Fitch also rattled investors on Friday. Fitch placed France on rating watch negative in October, signalling the possibility of a rating change.

Meanwhile, Japanese stocks snapped a three-day losing streak as strong US data and a weaker yen helped sentiment, while investors stayed optimistic about Japan's election on the weekend. The market was supported by expectations that Japanese Prime Minister Shinzo Abe's ruling party is on track for a landslide victory on Sunday. That would let him claim a fresh mandate for his economic revival policies, known as "Abenomics."

The Nikkei benchmark ended 0.7 percent higher at 17,371.58. For the week, it dropped 3.1 percent.

The broader Topix added 0.2 percent to 1,399.65 for the day. The JPX-Nikkei Index 400 also rose 0.2 percent, to 12,698.68.

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