U.S. Stocks Fall as Oil Posts Worst Drop in Over Three Years

U.S. stocks traded lower on Friday, dragged down by slumping energy shares as oil prices posted their biggest single-day drop in over three years. Cryptocurrencies notched fresh 14-month lows as the search for an elusive bottom continued.

Stocks Extend Losses

All of Wall Street’s major indexes finished in negative territory, with the Dow and S&P 500 extending their yearly slump beyond the 1% mark. The large-ap S&P 500 Index fell 0.7% to close at 2,632.56, with eight of 11 sectors finishing in the red. Energy stocks tumbled 3.3%, mirroring a massive slump in oil prices. Materials, communication services and information technology companies all posted big losses.

The Dow Jones Industrial Average declined 178.74 points, or 0.7%, to 24,285.96, its lowest in over four months. Energy blue-chips Chevron Corp (CVX) and Exxon Mobil Corp (XOM) were the biggest decliners while shares of Apple Inc. (AAPL) extended their slump.

The technology-driven Nasdaq Composite Index fell 0.5% to finish at 6,938.98, its lowest since April.

A measure of implied volatility known as the CBOE VIX edged higher on Friday, a sign that traders were anticipating turbulence over the next 30 days. The so-called “fear index,” which trades on a scale of 1-100, rose 3.5% to 21.52.

Oil Rout Intensifies

The rout in crude oil intensified on Friday, as concerns about surging supplies and weak demand growth drove prices sharply lower. West Texas Intermediate (WTI) futures for January settlement plunged $4.24, or 7.8%, to $50.39 a barrel on the New York Mercantile Exchange. That was not the worst settlement in over a year, but the biggest single-day drop since July 2015.

Brent, the global crude benchmark, fell below $60 a barrel for the first time this year. It last traded down $3.80, or 6.1%, at $58.80 a barrel in London.

Crude’s unrelenting selloff has been stoked by fears that rising global supplies will continue to offset weak demand growth over the next 12 months. Analysts have slashed their forecasts for global GDP growth and energy demand in 2019 even as major oil producers have vowed to make up the loss of Iranian exports. The Saudi-led Organization of Petroleum Exporting Countries (OPEC) may be reevaluating that strategy; according to The Wall Street Journal, the cartel is mulling a “quiet” production cut ahead of next month’s meeting in Vienna, Austria. Under such a scenario, the cartel would retain current output targets, first announced in 2016, which would imply a pullback because Saudi Arabia is currently overproducing by about 1 million barrels per day.

Crypto Market Cap Sinks to 14-Month Lows

The cryptocurrency market suffered a fresh selloff on Friday, as bitcoin and the major altcoins headed for new yearly lows. The often-cited crypto market cap reached a low of around $136 billion on Friday, the lowest since September 2017. Digital assets have sold off a staggering $75 billion since early last week.

Despite plunging price points, the blockchain market remains vibrant, according to CoiShares executive Meltem Demirors. In a recent interview, Demirors said that, even with the recent bear market, “value is continuing to grow across the cohort of companies serving the crypto ecosystem.”

He added: “Just look at the people in this industry — thousands who continue to spend their time, energy, and capital on helping the crypto ecosystem grow. By writing, researching, advocating, building, developing, or simply holding.”

Blockchain adoption has grown substantially in mainstream circles, especially among financial service providers looking to bring innovation and efficiency gains to market. The launch of crypto derivatives products has also meant that mainstream investors are participating in the market for the first time.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi