Business

Dow Takes A Nose Dive As Oil Prices Drop

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Steve Birr Vice Reporter

Stocks are taking a tumble Tuesday as another fall in oil prices slams the energy sector and earnings reports show deteriorating revenue.

The Dow Jones Industrial Average dropped over 275 points and remains volatile, responding to the depressed price of oil and dismal earnings reports released Tuesday by many energy titans including Exxon Mobile. Since the beginning of the trading year the markets have been in a tight lockstep with oil, with any drop in prices thrashing U.S. indices, reports USA Today.

West Texas Intermediate crude, the benchmark for U.S. produced oil, fell 5 percent to $30.05 a barrel, igniting Tuesday’s selloff. Exxon Mobile and Chevron dragged the Dow down with them on the poor energy news.

“Since the start of the year, there has been a 97 percent correlation between oil and equity prices,” Bruce Bittles, chief investment strategist at R.W. Baird, points out in a report released Monday.

The record low oil prices of 2015 destroyed Exxon’s revenue, which is down to $59.81 billion from $87.28 a year ago. In the fourth quarter the company’s earnings dropped to 67 cents a share from $1.32 in the fourth quarter of 2014, reports CNBC.

January was the worst start for the stock market since 2009, adding to investor frustration and fear over the future of the economy in 2016. Unstable monetary policy and poor growth in China continue to weigh on global markets as does the worldwide glut in oil, reports USA Today. Federal Reserve policy is also confusing investors. The Fed raised interest rates in December but has since backed off in the wake of the tumultuous markets.

Tom Stringfellow, chief investment officer at Frost Investment Advisors, told USA Today, “Unfortunately, until there is some stabilization in oil prices, China resolves its ‘monetary flight’, the dollar solves its ‘dollar-might’, and investors back off their recession fears, the drivers for any market bounce are fairly limited and emotionally based.”

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