Stocks waver as plunging oil prices pull energy stocks lower

Marley Jay
AP Markets Writer

New York —  After two days of huge losses, U.S. stocks ended the day back where they started on Tuesday. Energy companies sank as crude oil plunged 7 percent, but technology and consumer-focused companies climbed.

U.S. crude oil fell to its lowest price since August 2017, and it has now fallen almost 40 percent since early October. Investors are worried that supplies continue to increase and that demand is slowing as the global economy weakens. The plunge in oil prices has crushed energy company stocks in recent weeks.

Energy stocks including Exxon Mobil fell again on Tuesday, but some of those losses were offset by gains in Apple, Amazon, Microsoft and Boeing. Boeing raised its quarterly dividend and said it will buy back another $20 billion of its own stock. Boeing has tumbled on worries that the global trade war will hit its profits particularly hard.

The Federal Reserve started its last meeting of the year. Investors expect it to raise interest rates on Wednesday when the meeting concludes. That would be its fourth increase this year, and its ninth in three years. Investors are hoping the Fed will say the increases are going to slow down in 2019 in light of recent signs that economic growth is slowing.

Trading was turbulent. Two days of widespread market declines had knocked 1,004 points off the Dow Jones Industrial Average, and on Tuesday, investors couldn’t find a convincing reason for stock prices to go higher. On the other hand they didn’t see cause for another big decline, either.

There haven’t been any big developments in U.S.-China trade talks, a major focus for markets, since the beginning of this month. JJ Kinahan, chief markets strategist for TD Ameritrade, said that’s left investors confused about the state of the trade dispute and reluctant to commit to stocks, while businesses aren’t spending.

“We don’t know the rules of the game,” he said. “People can’t plan. When you can’t plan, you’re not anxious to buy stocks.”

The S&P 500 index inched up 0.22 points to 2,546.16, but is still trading at its lowest levels in 14 months. The Dow industrials added 82.66 points, or 0.4 percent, to 23,675.64. The Nasdaq composite gained 30.18 points, or 0.4 percent, to 6,783.91.

The Russell 2000 index of smaller companies lost another 0.97 points, or 0.1 percent, to 1,377.18. The index is 21 percent below the peak it set in August, meaning it’s in what Wall Street calls a “bear market.”

Benchmark U.S. crude plunged 7.3 percent to $46.24 a barrel in New York. Brent crude, used to price international oils, sank 5.6 percent to $56.26 a barrel in London.

The twin fears of slower global economic growth and rising stockpiles are bad for crude prices. While OPEC and several other countries recently agreed to cut production of oil in 2019, that hasn’t stemmed the decline in prices. Traders have doubts that the cut is large enough to balance supply and demand.

“They’re not the only game in town anymore,” Kinahan said of OPEC. He said rising oil production in the U.S. and a combination of alternative fuels and greater efficiency by businesses has reduced OPEC’s ability to sway the oil market.

On Tuesday, the Energy Information Administration said U.S. shale oil production will keep climbing in January, and the Wall Street Journal reported that oil production in Russia reached a record high in December.

The Federal Reserve recently forecast three more increases in interest rates next year, but investors doubt that’s going to happen. The Fed’s rates help set borrowing costs for various types of loans. Higher rates can slow economic growth, and that’s something investors have been worrying about as China and Europe have suggested growth is slowing, and the U.S. economy is also expected to cool off in 2019.

Those higher rates also make stocks look relatively less attractive.

After the increase in its dividend and the larger stock repurchase, Boeing climbed 3.8 percent to $328.06. The stock has dropped 16 percent since early October. Several other companies that have recently suffered big losses also said they will buy back more stock, including health care products giant Johnson & Johnson and insurer Allstate.

The Commerce Department said developers broke ground on more apartments in November, and homebuilders climbed. Lennar gained 2.5 percent to $41.01 and NVR added 1.1 percent to $2,479.81. The companies have taken huge losses this year as rising mortgage rates and prices have reduced home sales.

Real estate investment trusts also rose Tuesday. Apartment building owner AvalonBay Communities gained 1.1 percent to $181.91 and CBRE Group rose 4.3 percent to $41.15. Real estate companies had taken sharp losses Monday.

Bond prices rose again. The yield on the 10-year Treasury dipped to 2.82 percent from 2.85 percent late Monday.

Germany’s DAX lost 0.3 percent, deepening its slide into a bear market. Britain’s FTSE 100 shed 1.1 percent and France’s CAC 40 dripped 1 percent lower.

Losses were more severe in Asia. The Nikkei 225 in Japan lost 1.8 percent, the Hang Seng in Hong Kong dropped 1 percent and South Korea’s Kospi slipped 0.4 percent.

In other commodities trading, wholesale gasoline fell 4.2 percent to $1.35 a gallon and heating oil lost 4 percent to $1.75 a gallon. Natural gas jumped 8.8 percent to $3.84 per 1,000 cubic feet.

Gold inched up 0.1 percent to $1,253.30 an ounce. Silver fell 0.4 percent to $1470 an ounce. Copper skidded 3.3 percent to $2.66 a pound.

The dollar dipped to 112.53 Japanese yen from 112.75 yen late Monday. The euro rose to $1.1357 from $1.1350, and the British pound rose to $1.2639 from $1.2629.

Markets Writer Stan Choe contributed to this report from New York.