Credit: Shutterstock photoContinuing decline in oil prices dragged benchmarks lower on Friday. Both the Dow and the S&P 500 posted their worst ever five-day start to a year. Decline in oil prices on Friday offset signs of stability in Chinese markets and an upbeat jobs report. Meanwhile, benchmarks ended a choppy week in the red as weak Chinese economic data raised concerns about global growth prospects and weighed on oil prices.
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The Dow Jones Industrial Average (DJI) declined 167.65 points or 1% to close at 16,346.45. The Standard & Poor's 500 (S&P 500) dropped 1.1% to close at 1,922.02. The tech-laden Nasdaq Composite Index closed at 4,643.63, decreasing almost 1%. The fear-gauge CBOE Volatility Index (VIX) gained 8.1% to settle at 27.01. A total of around 8.9 billion shares were traded on Friday, higher than the last 20-session average of 7.3 billion. Decliners outpaced advancing stocks on the NYSE. For 67% stocks that declined, 31% advanced.
Benchmarks ended lower on Friday following continuous slump in oil prices. Persistent fears of a slowdown about China's economic growth weighed on oil prices since the world's second largest economy is a large importer of the fuel. The WTI Crude price fell 0.3% to settle at $33.16, while Brent Crude dropped 0.6% to close at $33.55. Meanwhile, the WTI Crude price slipped 10.5% for the week, the largest weekly loss since the week ended Dec 11. Additionally, the Brent crude also skidded about 10% for the week.
Energy shares took a beating due to drop in oil prices. The Energy Select Sector SPDR (XLE) declined 1.3%. Dow components Exxon Mobil Corporation ( XOM ) and Chevron Corporation ( CVX ) dropped 2% and 1.1%, respectively. Other key stocks from the energy sector such as ConocoPhillips ( COP ), Schlumberger Limited ( SLB ) and Valero Energy Corporation ( VLO ) decreased 1.8%, 1.7% and 5.3%, respectively.
Nevertheless, China's stock market showed some signs of stability on Friday. While stocks moved north, yuan strengthened on Friday after China's securities regulator removed a mechanism that resulted in more volatility in the markets. In China, the early-year meltdown resulted in a loss of about $1.1 trillion from its stock markets.
Friday's losses were broad based, with all 12 sectors of the S&P 500 ending in the red. The Financial Services Select Sector SPDR (XLFS) dropped 1.9% and was the worst performer among the S&P 500 sectors. Key stocks from the sector including Bank of America Corporation ( BAC ), Citigroup Inc. ( C ), Morgan Stanley ( MS ), The Goldman Sachs Group, Inc. ( GS ) and JPMorgan Chase & Co. ( JPM ) decreased 1.9%, 3%, 2.1%, 0.4% and 2.2%, respectively.
In economic news, according to the Bureau of Labor Statistics (BLS), the U.S. economy created a total of 292,000 jobs in December, beating the consensus estimate of 200,000. The tally was also higher than November's revised jobs number of 252,000. It was revised up from last month's reported figure of 211,000. October's jobs numbers were also increased to 307,000 from 298,000, the biggest increase of 2015. Employment gains in December occurred across several industries including professional and business services, construction, health care, food services and drinking places.
Meanwhile, the unemployment rate remained unchanged at 5% in December. The unemployment rate was in-line with the consensus estimate. The average hourly earnings remained little changed at $25.24 per hour in December, while the consensus estimated a rise of 0.2%.
Separately, the U.S. Department of Commerce announced that US wholesale inventories declined 0.3% in November after decreasing 0.3% in October. This fall in wholesale inventories in November was more than the consensus estimate of a decline of 0.1%.
For the week, the S&P 500, the Dow and the Nasdaq plunged 6%, 6.2% and 7.3%, respectively. Concerns about China's sluggish economic growth along with continuous decline in oil prices, dragged benchmarks lower for the week. Disappointing report on China's manufacturing activity and reports on its service sector activity expanding at a slower pace in December stoked fears about global growth prospects.
Global oil prices touched record low levels on weak data from China. Additionally, persistent supply glut, a stronger dollar and heightened tension in the Middle East also adversely affected oil prices. Separately, North Korea's claim that the country successfully carried out a nuclear test added to the bearish sentiment.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
