While you were sleeping: Wall St follows oil lower

Wednesday 3rd February 2016

Stocks fell with the price of oil amid concern about the global economy and the outlook for corporate profits.

Brent crude last traded about 3 percent lower, while US crude last traded about 4 percent weaker ahead of US government data expected to show that US inventories are continuing to rise.

Wall Street tumbled. In 12.59pm trading in New York, the Dow Jones Industrial Average dropped 1.6 percent, while the Nasdaq Composite Index shed 1.5 percent. In 12.44pm trading, the Standard & Poor’s 500 Index retreated 1.5 percent.

Shares of Exxon Mobil dropped, last 2.7 percent lower, after the company reported its smallest profit in more than a decade and slashed its drilling budget and suspended share buybacks.

“While our financial results reflect the challenging environment, we remain focused on the business fundamentals, including project execution and effective cost management,” Rex Tillerson, Exxon's chief executive officer, said in a statement.

Declines in shares of Goldman Sachs and those of Chevron, recently down 4.2 percent and 3.4 percent respectively, led the drop in the Dow. Bucking the trend as the only gainer in the Dow was DuPont, its shares last traded 4.2 percent higher.

"We still haven't broken the correlation between oil and equities and we are yet to find a bottom in oil prices," Jeff Carbone, co-founder of Cornerstone Financial Partners in Charlotte, North Carolina, told Reuters.

Shares of Alphabet, Google’s parent company, climbed to a record high, recently trading 3.7 percent higher, after it posted earnings that pleased investors. Alphabet surpassed Apple as the world’s most valuable company.

“Alphabet’s core business looks very healthy,” Josh Olson, an analyst at Edward Jones & Co, told Bloomberg. “That’s going to build investors’ confidence about the other bets they’ve been making.”

In Europe, the Stoxx 600 Index ended the day with a 1.2 percent slide from the previous close, amid disappointing results from BP and UBS Group. Germany’s DAX Index fell 1.8 percent, the UK’s FTSE 100 Index shed 2.3 percent, while France’s CAC 40 Index gave up 2.5 percent.

Shares of BP sank 8.7 percent in London after the company reported a net annual loss of US$6.5 billion and announced fresh job cuts.

"Should low oil prices prevail, they're a quarter or two away from having to cut the dividend, or divest some more assets," Jack Allardyce, analyst at Cenkos Securities, told Reuters.

Meanwhile, global miners fell overnight in the wake of Standard & Poor's decision to downgrade BHP Billiton's credit rating. BHP shed 6.7 per cent in London, with Anglo American, Glencore and Rio Tinto each ending at least 4.6 per cent lower.

BusinessDesk.co.nz

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