U.S. stocks fall amid crude oil drop as Fed policy meeting looms

Traders on the NYSE floor. PHOTO: EPA
Traders on the NYSE floor. PHOTO: EPA

NEW YORK (BLOOMBERG) - Bearish sentiment is persisting, with U.S. stocks falling for a fourth day in five, as oil prices retreat further and investors prepare for next week's Federal Reserve interest rate decision.

Equities extended a weekly decline as crude dropped to the lowest level since 2008 in London on expectations for a continuing supply glut. DuPont Co. slipped 5.5 per cent after jointly announcing a merger of equals with Dow Chemical Co. Dow lost 2.3 per cent. A measure of volatility has jumped more than 30 per cent this week, the most in a month.

The Standard & Poor's 500 Index slid 1.1 per cent to 2,030.34 at 9:33 a.m. in New York (10.30 pm Singapore time). The index eked out a 0.2 per cent gain on Thursday, while still heading for its first weekly drop in four.

"Oil breaking down 1 percent and making new lows, that's definitely caused some angst in the equities market, and I've been watching them trade almost almost tick for tick all morning," said Dave Lutz, the Annapolis, Maryland-based head of exchange-traded funds trading for JonesTrading Institutional Services.

Stocks have stuttered so far this month, proving an exception to a historical trend of a strong December performance in global equities. Energy companies in the S&P 500 are down 9 percent, following a more than 12 percent retreat in crude prices.

Traders are pricing in a 76 per cent chance that next week's Fed meeting will confirm Chair Janet Yellen's belief that the world's biggest economy is strong enough to cope with the first increase in borrowing costs since 2006. Still, investors are caught between optimism about the U.S. and concern that a slowdown in China and the consequent tumble in commodities will damp global growth prospects.

As investors look for further confirmation in the Fed chair's faith in U.S. growth, data today showed retail sales climbed in November by the most in four months, as consumers put to work some of the money saved from the cheapest gasoline since early 2009.

Separate data showed wholesale prices rose last month by the most since June, as a pickup in profit margins at service providers more than offset cheaper costs of goods. A measure of consumer sentiment in December is also expected to improve, according to economists surveyed by Bloomberg.