Oil Price Slump Rattles U.S. Stocks

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Shares in the U.S. closed lower Wednesday after fresh data showed a surprise spike in oil inventory in the country. The U.S. Energy Information Administration said that oil inventories rose at a time when economists had predicted it would fall.

With that, prices of U.S. crude oil declined 2.5% to $41.71 a barrel, dragging down stocks linked to the commodity and leaving markets in the red.

How the indices performed

The Dow Jones Industrial Average (INDEXDJX:.DJI) fell 0.2% after shedding 37.39 points to close the day at 18495.66. The S&P 500 (INDEXSP:.INX) pulled back 0.3% and the NASDAQ Composite (INDEXNASDAQ:.IXIC) declined 0.4%. The tech-weighted NASDAQ closed at a record level a day earlier.

Despite falling energy stocks, consumer shares fared well in the U.S. on Wednesday. The sector was lifted by stocks such as Ralph Lauren Corp (NYSE:RL), which rose 8.5% after reporting second-quarter adjusted earnings that exceeded expectations. Walt Disney Co (NYSE:DIS) gained 1.2% after the company said that it intends to acquire a stake in streaming-media company BAMTech for $1 billion.

Once again fading hopes of a rate hike

The downbeat energy report comes after the U.S. Labor Department also reported that the productivity measure fell 0.5% in the second-quarter, marking a slight improvement from the 0.6% decline in the first-quarter but worse than the 0.4% decline that economists had expected.

The energy and productivity reports have complicated expectations for an interest rate hike this year. The policy officials of the Federal Reserve recently hinted that they could raise rate if they were satisfied by the quality of the economic data to be reported after they noted that near-term risk to the U.S. economy had subsided. But the mixed economic data could delay rate action by the central bank, which explains why the dollar also eased against a basket of global rivals on Wednesday.

Focus on retail data

But U.S. stocks could still shrug off the tepid energy report if monthly retail sales figures to be released Friday turn out to be favorable. Investors are closely paying attention to the retail data following bullish labor and now tepid energy and productivity data.

“It’s [retail data] going to play an outsize role this week,” said Brian Jacobsen of Wells Fargo Asset Management.

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