S&P 500 heads toward four-day drop as energy slumps with crude

NEW YORK – U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its first four-day stretch of losses in 13 months, as a slump in energy shares broadened to the rest of the market.

All 10 major groups in the S&P 500 dropped, with energy companies tumbling 4.2 percent, the most since November. Exxon Mobil Corp. lost 3 percent and Chevron Corp. retreated 4 percent. Transocean Ltd. plunged 8.4 percent. Caterpillar Inc. tumbled 4.5 percent.

The S&P 500 slipped 1.6 percent to 2,024.65 at 12:40 p.m. in New York, dropping below its average price for the past 50 days for the first time since Dec. 17. The Dow Jones Industrial Average retreated 295.78 points, or 1.7 percent, to 17,537.21. Trading in S&P 500 companies was 16 percent above the 30-day average for this time of the day.

“The declines in oil are representing something much more ominous, which is a global economic slowdown,” Jeff Sica, president and CEO of advisory firm Circle Squared Alternative Investments, which oversees $1.5 billion, said by phone. “Investors have gone past the thought that this is good for the economy.”

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The Chicago Board Options Exchange Volatility Index, a measure of demand for options on the S&P 500, jumped 20 percent to 21.26 today, the highest level since Dec. 17.

The S&P 500 fell 1.5 percent last week, closing 1.6 percent below its all-time high reached Dec. 29, as traders sold shares that rose the most in 2014 after a three-year advance that added $9.4 trillion to equity values. The benchmark index posted its first December decline since 2007, trimming its annual increase to 11 percent.

Still, professional forecasters are calling for an 8.5 percent gain this year, and buyers of exchange-traded funds ended an obsession with bonds last quarter, sending four times as much cash to U.S. shares. It’s the first time strategists have been unanimously bullish since 2009, when stocks surged 23 percent.

Four days

The S&P 500 is heading toward its first four-day string of losses since December 2013, dropping 2.7 percent over that time period. The gauge never fell more than three straight days in 2014, a first in data compiled by Bloomberg going back to 2000. It has jumped more than 200 percent from its low in March 2009, including its biggest annual rally since 1997 in 2013.

Oil declined for a third day today, falling as much as 6.7 percent in London, as record supplies from Iraq and Russia bolstered speculation a global glut that’s driven crude into a bear market will persist this year. Energy companies in the S&P 500 lost 10 percent in 2014, the most among 10 industry groups.

Europe inflation

Data showed German inflation slowed more than forecast, adding to signs that euro-area inflation is turning negative and potentially bolstering the case for more European Central Bank stimulus. ECB officials are debating whether to expand stimulus to including buying government bonds as plunging oil prices threaten to tip the euro area into a deflationary spiral.

“This fear trade is being sparked by the deflationary concerns over in Europe,” said Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion. “Sprinkle that together with the fact that it looks as if oil prices are going to continue to see lower lows in the course of the next couple weeks, and it puts together a risk-off trading environment within the markets.”

Global markets also slumped today amid investor concern Greece might leave the euro region. The country began an election campaign that Prime Minister Antonis Samaras said may lead to an exit from the currency union should the Syriza party win. The euro weakened to an almost nine-year low.

Greek impact

“Greece is creeping back into the headlines and it’s an issue for people to pay attention to,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone from Austin, Texas. “The market is very close to record highs and we haven’t had a correction since fall of 2011. There’s a lot of potential for a pullback when you’re at these levels.”

Investors later this week will evaluate data on U.S. hiring in December and minutes from the Federal Reserve’s last policy meeting at which it pledged patience in raising interest rates even as the economy expands.

Alcoa Inc. unofficially starts the earnings season when it reports fourth-quarter results on Jan. 12. Profit at S&P 500 companies climbed 2.4 percent in the last three months of 2014, analysts estimate.

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