By Anora Mahmudova and Sara Sjolin, MarketWatch Energy,
materials stocks sell off
NEW YORK (MarketWatch) -- U.S. stocks suffered their biggest
one-day slide in nearly seven weeks on Monday as a withering
selloff among energy companies, which closely tracked oil's
continued price slide, dragged down key benchmark indexes.
Downbeat economic reports form China, Japan and Europe also
dented sentiment. Nervousness among investors was evident from a
jump in 10-year Treasurys with yields falling five basis points and
a 20% jump in the CBOE Vix index, commonly knows as Wall Street's
fear gauge.
S&P 500 (SPX) closed 15 points, or 0.75, at 2,060.31. Losses
were led by energy companies, as the sector dropped 3.9%.
Materials, industrials and technology sector stocks also sold off,
while defensive sectors such as utilities and health care drew
buyers.
The Dow Jones Industrial Average (DJI) dropped as much as 150
points at session lows, but ended 106.31 points, or 0.6% lower, at
17,852.48. McDonald's Corp.(MCD) took a bite out of the blue-chip
stock index following disappointing sales. Oil giants ExxonMobil
Corp. (XOM) and Chevron Corp (CVX) also weighed on the index,
dropping 2.3% and 3.7% respectively.
The tech-heavy Nasdaq Composite (RIXF) ended the day with a loss
of 40 points, or 0.8%, at 4,740.69. The heaviest-weighted component
of the index, Apple Inc. (AAPL) fell 2.3%.
The broader market moves are playing out amid the back drop of
crude oil's continued slide. Crude oil (CLF5) endured a bruising
day of its own, falling more than 4% on Monday and hitting a new
five-year low on continued concerns about oversupply.
Espousing a more sanguine outlook about the day's trading, Randy
Frederick, managing director of trading and derivatives at the
Schwab Center for Financial Research, down played Monday's slump,
pointing out that increased buying in late afternoon session after
a selloff in the morning usually indicates a short-term bullish
view of institutional investors.
"The move on the S&P 500 is still less than 1% and selling
on Wall Street seems to be strictly contained to industries with
close ties to oil prices. While it is true that the energy
companies are hit hard today, lower oil prices ultimately benefit
consumers and other business that use oil, which are a much bigger
part of the S&P 500," Frederick said.
Brian Fenske, head of sales trading at Investment Technology
Group, brokerage and technology firm, struck a similar chord,
saying a lack of clarity about crude oil prices were dictating
trading strategy on Monday.
"There is a lot of uncertainty when it comes to crude oil
prices, which made the whole energy sector difficult to invest in,
which is why we are seeing so much selling in those companies,"
Fenske said.
Also read: 5 global problems that cheaper oil may fuel
Before Monday's retreat, the Dow was flirting with hitting the
psychological benchmark of 18,000.
Concerns about the health of the global economy resurfaced on
Monday after disappointing Chinese trade numbers and data showing
Japan's economy contracted more than initially forecast in the
third quarter. Figures from Germany showed industrial production
expanded less than expected in October.
Also read: How strong dollar may hurt the global economy
The euro (EURUSD) traded around a 28-month low after Ewald
Nowotny, member of the European Central Bank's Governing Council,
said the currency union is the weak spot in the world economy.
European stock markets were also mostly lower.
Energy stocks sell off: Highlighting the broad selloff in
energy, the Energy Select Sector SPDR Fund ETF (XLE) fell 4%. More
specifically, Denbury Resources Inc. (DNR) slid 10%, making it the
worst performer on the S&P 500. Newfield Exploration Co (NFX)
dropped 8.5%, EQT Corp. (EQT) slid 7.6%.
Utilities stocks were in demand, with the overall sector rising
0.7%. Ameren Corp (AEE) rose 2.5% while PG&E Corp (PCG) added
1.9%.
Biotech stocks were one of the bright spots on Wall Street.
Shares of Celgene Corp (CELG) jumped 3.6% on news that the biotech
company extended its partnership with Agios to work on a cancer
drug.
In mergers, Cubist Pharmaceuticals Inc.(CBST) soared 35% after
drug giant Merck & Co. Inc. (MRK) agreed to buy the smaller
antibiotics maker for $8.4 billion. Merck shares closed 0.6%
higher.
(Read more in today's Movers & Shakers column:
http://www.marketwatch.com/story/vail-resorts-hr-block-earnings-in-focus-2014-12-07.)
Other markets: Asian markets got their first chance to react to
the solid U.S. jobs report issued Friday, sending indexes in Japan
and China higher. China's Shanghai Composite closed above 3,000 for
the first time since 2011.
In metals, gold prices rose 1.2% while the dollar (DXY) slipped
against the yen after the data showed the Japan's GDP shrank more
than previously estimated.
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