U.S. stocks retreat as oil drop overshadows deals, factory data

NEW YORK – U.S. stocks retreated, after the worst week in more than two years for the Standard & Poor’s 500 Index, as the continuing selloff in oil overshadowed a surge in industrial production and corporate deals.

The S&P 500 fell 0.4 percent to 1,994.17 at 1:15 p.m. in New York, falling below its average price for the past 50 days. The gauge lost as much as 1 percent, slipping below its 100-day moving average before paring the decline.

The Dow Jones Industrial Average dropped 76.94 points today, or 0.5 percent, to 17,203.89. The measure plunged 3.8 percent last week, the biggest drop since November 2011. Trading in S&P 500 stocks was 24 percent above the 30-day average at this time of day.

“People are going to come into these markets looking at the same things they did last week, oil and secondary interest rates,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone from Austin, Texas. “To me, the oil selloff is a bit overdone and people’s reactions are a bit negative to it. We need to see stability in oil that lasts a couple of days. If we get that, people will stop being concerned.”

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The S&P 500 erased an early advance of 0.8 percent today as crude dropped more than 2.3 percent. The benchmark stocks index then fell as much as 1 percent by midday before rebounding. The gauge lost 3.5 percent last week to a six-week low as crude plunged to a five-year low.

More than $1.8 trillion was erased from the value of global equities last week as oil prices tumbled on signs of weakening demand, raising concern over the strength of the global economy. The Chicago Board Options Exchange Volatility Index, also known as the VIX, jumped 78 percent in the past five days, its biggest advance in more than four years. The gauge jumped as much as 18 percent and lost as much as 16 percent today.

Fed meeting

Equities rose earlier today as a report showed industrial production surged in November by the most since May 2010 as U.S. assembly lines churned out more consumer goods and business equipment, signaling manufacturing is bolstering economic growth.

The 1.3 percent gain in output at factories, mines and utilities followed a 0.1 percent increase the prior month that was previously reported as a decline, figures from the Federal Reserve showed. Manufacturing rose 1.1 percent, the most in nine months, and output at utilities was the strongest in almost eight years.

Investors are also waiting for the Fed’s update on the timing and pace of interest-rate increases. Policy makers may decide on Dec. 17 whether to keep their pledge to hold interest rates low for a considerable time.

Stocks reversed gains earlier as oil fell again after reaching a five-year low last week. West Texas Intermediate has tumbled 15 percent this month after the Organization of Petroleum Exporting Countries cut its forecast for how much crude it will need to provide in 2015 and the International Energy Agency forecast weaker consumption and increased supply from countries outside of OPEC.

Rapid retreat

“Oil can stabilize,” Dan Veru, chief investment officer at Fort Lee, N.J.-based Palisade Capital Management, said by phone. The firm oversees $5 billion in assets. “It’s not so much that it’s low, but the velocity of the change has been so rapid that it just scares the pants off of people.”

Equities also erased gains as the Australian Broadcasting Corp. reported police stormed a cafe in Sydney where a gunman had been holding hostages. The siege that began Monday morning triggered a lockdown in Sydney’s central business district, three months after Australia raised its terrorism alert to the highest level in a decade.

“This is a continuation of the past three or four trading days,” Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research Inc., said by phone. “Every time we’ve had a rally, we’ve finished near the low of the day.”

The S&P 500 pared gains of 1.45 percent Dec. 11 to close the day up 0.5 percent. The next day, U.S. equity losses picked up speed in the final hour as the Dow average plunged more than 100 points and the S&P 500 ended down 1.6 percent, about 2 points above its average price for the last 50 days, a level monitored by technical analysts.

Five of 10 industries in the S&P 500 declined. Financials and utilities shares dropped more than 0.4 percent, while energy shares advanced 0.8 percent.

Among U.S. stocks moving today, PetSmart Inc. rose 4.5 percent after a group led by BC Partners agreed to buy it for $8.3 billion. Emerson Electric Co. gained as much as 1.9 percent after selling a power-transmissions business to Regal-Beloit Corp. for $1.4 billion. The stock later pared gains to trade little changed.

McDonald’s Corp., General Electric Co. and American Express Co. lost more than 1 percent for the biggest declines in the Dow. Exxon Mobil Corp. and Boeing Corp. rose the most.

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