Wall St Drops with Oil near 7-year Low; Europe Stocks Up

Oil prices skidded to their lowest level in nearly seven years on Monday, hurting the shares of major oil companies on Wall Street as a global glut showed no signs of abating, while European stocks benefited from a weaker euro.

 

Brent crude prices fell to $41.20, their lowest since February 2009, after a meeting of members of the Organization of the Petroleum Exporting Countries Friday ended in disagreement over production cuts and without a reference to its output ceiling.

 

Oil majors Exxon, down 3 percent, and Chevron (CVX) , which fell 2.9 percent, were the biggest drags on the U.S. Dow and benchmark S&P 500 indexes. Increased strength in the dollar for a second straight session made it more expensive to hold crude positions.

 

Brent crude was last down $2.26, or 5.3 percent, at $40.74 a barrel, while U.S. crude was last down $2.12, or 4.9 percent, at $40.88 per barrel.

 

"As a result of the collapse in oil and gas prices today, the market is worried that you're going to see less capital spending, you're losing a lot of a good-wage jobs in the oil patch, and people are worrying that we're going to see a snowball of defaults among high-yield energy issuers," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

 

A weaker euro helped boost European shares, which rose from three-week lows hit last week when the European Central Bank disappointed investors with its latest stimulus package. A weaker euro helps stocks by making European exports cheaper relative to competing imports.

 

An outlier among European stocks was Electrolux, which sank over 13 percent after its deal to buy General Electric's appliance business fell through.

 

MSCI's all-country world equity index, which tracks shares in 45 nations, was last down 0.7 percent.

 

The Dow Jones industrial average fell 0.83 percent at 17,698.75. The S&P 500 was down 0.89 percent, at 2,073.10. The Nasdaq Composite was off 0.89 percent, at 5,096.62.

 

Europe's broad FTSEurofirst 300 index added 0.45 percent, and was last at 1,464.4. The euro was last down 0.32 percent, at $1.0856.

 

The dollar rose on expectations the U.S. Federal Reserve is on track to raise interest rates next week in the wake of a solid November jobs report. The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.28 percent, to 98.62.

 

"It's pretty much a done deal they will move," Charles St-Arnaud, currency strategist at Nomura Securities International in New York said of the Fed, which meets on monetary policy on Dec. 15-16.

 

U.S. Treasury debt prices rallied as investors consolidated positions in a week that is generally thin on economic data after last Friday's stronger-than-expected U.S. November jobs report.

 

Benchmark 10-year Treasury notes were last up 14/32 in price to yield 2.21 percent, from a yield of 2.28 percent late Friday.

 

Spot gold prices fell from a three-week high and were last down $7.40, or 0.7 percent, at $1,077.1 an ounce after the gains in the dollar.