Stocks falter as price of oil slides
U.S. stock indexes retreated from their record heights Tuesday after a slump in oil prices weighed on energy companies.
Losses were widespread, with five stocks dropping on the New York Stock Exchange for every two that rose. Many of the sharpest declines were concentrated in the energy sector.
The price of oil touched its lowest price since midNovember.
Benchmark U.S. crude fell 97 cents, or 2.2%, to settle at $43.23 a barrel. Brent crude, the international standard, fell 89 cents to $46.02 a barrel.
Oil has been sloshing between $40 and $55 a barrel for much of the last year, down from a peak of more than $110 in summer 2013. Drillers have gotten much better at pulling oil from the ground, which has helped supplies to balloon and thus weighed on prices. Many oilproducing countries have banded together to cut production, but analysts are skeptical about how much they can influence prices.
A main reason the stock market has climbed to record after record this year has been the resurgence in profit growth for big companies, and the energy sector is expected to play a leading role in that. Analysts forecast energy companies in the S&P 500 will report better than 300% growth in their earnings per share this year. But if the price of oil keeps dropping, that’s at risk.
John Manley, chief equity strategist at Wells Fargo Funds Management, is still optimistic that expectations for earnings across the market can keep rising. Lower oil prices would undercut profits for energy stocks, but lower fuel bills should help other industries.
And as long as profits continue to rise, Manley said, stocks can too.
On Tuesday, Transocean sank 4.2% to $8.20 and Marathon Oil slid 3.4% to $12.06.
The biggest decliner in the S&P 500 was Chipotle Mexican Grill, which slid 7.3% to $425.60 after the restaurant chain said marketing costs will eat up a slightly bigger cut of revenue this quarter than last.
On the opposite end was home builder Lennar, which rose 2.1% to $53.87 after reporting stronger revenue and earnings than expected.
Reliance Steel & Aluminum fell 3.7% to $69.84 after the Los Angeles firm lowered its earnings forecast.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.15% from 2.19%.
The euro fell to $1.1128 from $1.1147. The dollar fell to 111.41 yen from 111.54 yen.
Gold fell $3.20 to settle at $1,243.50 an ounce, silver fell 9 cents to $16.42 an ounce, and copper fell 4 cents to $2.55 a pound. Natural gas rose a penny to $2.91 per 1,000 cubic feet. Heating oil fell 2 cents to $1.39 a gallon. Wholesale gasoline fell 3 cents to $1.42 a gallon.