U.S. Stocks Tumble to Cap Dow’s Worst Week Since 2011

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U.S. stocks sank, with the Dow Jones Industrial Average capping its biggest weekly drop in three years, as oil continued to slide and Chinese industrial data raised concern over a global economic slowdown.

Materials stocks declined the most in the Standard & Poor’s 500 Index, losing 2.9 percent as a group, while energy shares dropped 2.2 percent. International Business Machines Corp., DuPont Co. and Exxon Mobil Corp. sank at least 2.9 percent to lead declines in all 30 Dow stocks.

The S&P 500 lost 1.6 percent to 2,002.33 at 4 p.m. in New York, extending losses in the final hour to cap a weekly drop of 3.5 percent. The Dow sank 315.51 points, or 1.8 percent, to 17,280.83. The Dow slid 3.8 percent for the week, its biggest decline since November 2011.

“Clearly the oil situation is driving things,” Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service and Associates Inc., said in a phone interview. “At first it was just oversupply of oil. But now it’s that, plus fear of a world economy that’s growing too slow. Those fears are definitely outweighing the positive signs we’re seeing domestically.”

Selloff Acceleration

The selloff picked up speed in the final hour as the Dow average plunged more than 100 points and the S&P 500 ended about 2 points above its average price for the last 50 days, a level monitored by technical analysts. At about 2:50 p.m., March futures on the benchmark gauge for U.S. equities slipped below 2,000 for the first time since Nov. 4.

More than $1 trillion was erased from the value of global equities this week as oil prices tumbled, raising concern over the strength of the global economy. Oil extended losses today amid speculation that OPEC’s biggest members will defend market share against U.S. shale producers. The International Energy Agency cut its forecast for global oil demand for the fourth time in five months.

The Chicago Board Options Exchange Volatility Index, a measure of the cost of options on the S&P 500 known as the VIX, jumped 78 percent this week, its biggest weekly rally in more than four years.

Stocks around the world fell today after November Chinese factory production growth slowed more than estimated. Data showing a 7.2 percent gain from the year before missed the 7.5 percent median estimate in a Bloomberg News survey. The Stoxx Europe 600 Index plunged 2.6 percent today and 5.8 percent over five days, its worst week in three years.

Economic Data

U.S. equities briefly pared losses as a report showed consumer confidence improved this month. The Thomson Reuters/University of Michigan preliminary December index of consumer sentiment increased to 93.8 from 88.8 last month. The median projection in a Bloomberg survey of 69 economists called for an advance to 89.5.

A separate report showed wholesale prices fell more than forecast in November, led by the biggest drop in energy costs in more than a year, signaling inflation pressures remain weak even as the world’s largest economy is expanding. The 0.2 percent decrease in the producer-price index followed a 0.2 percent advance in the prior month, the Labor Department data showed.

Fed Policy

Oil at a five-year low and slowing overseas markets will subdue prices in the production chain that feed into the cost of living. Persistently weak inflation has allowed Federal Reserve policy makers, who are scheduled to meet next week, room to keep interest rates near zero after ending monthly asset purchases in October as the economy strengthens.

“With falling oil prices and the stronger dollar, pipeline pressures are minimal,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “There’s no real threat of higher inflation. The Fed has a lot more leeway.”

All 10 major groups in the S&P 500 declined today, with raw-material, energy and financial companies dropping more than 2 percent.

The S&P 500 Materials Index decreased 2.9 percent as Freeport-McMoRan Inc. and Dow Chemical Co. slid more than 5.2 percent.

Energy companies in the benchmark gauge lost 2.2 percent, with oil producers and drillers including Nabors Industries Ltd., Noble Energy Inc. and QEP Resources Inc. declining more than 3.1 percent.

Transportation Stocks

The Dow Jones Transportation Average fell 1 percent, its fourth decline in five days. The Bloomberg U.S. Airlines Index decreased 1.5 percent as a technical issue at an air-traffic center caused delays at Heathrow Airport, Europe’s busiest hub, raising concern about the control center’s reliability.

An S&P 500 index of retailers rose as much as 0.7 percent before erasing gains in the final half hour and ending 0.3 percent lower.

Adobe Systems Inc. surged 9 percent. The software maker reported sales that topped estimates and agreed to buy stock-photography provider Fotolia LLC for about $800 million.

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