Oil slumps to seven-year low, drags down Wall St

Oil majors Exxon and Chevron fell about 3 per cent and were the biggest drags on the S&P.

Oil majors Exxon and Chevron fell about 3 per cent and were the biggest drags on the S&P.

Wall Street fell on Monday as energy and raw material stocks took a hit, with oil prices falling to their lowest in nearly seven years.

Brent crude and US crude extended their decline and fell as much as 5 per cent, after OPEC's meeting last week failed to address a growing supply glut.

A stronger US dollar also made it more expensive to hold crude positions. The greenback rose for a second day and was up 0.3 per cent at 98.66 against a basket of major currencies.

Oil majors Exxon and Chevron fell about 3 per cent and were the biggest drags on the S&P and among the stocks weighing on the Dow.

The S&P materials index fell 1.9 per cent, its steepest fall in three weeks, with Dow Chemicals and DuPont falling about 2 per cent.

The impact of the fall in oil prices offset some of Friday's gains that were triggered by a strong jobs report.

The solid November employment report showed that the economy was strong enough to absorb an interest rate hike, which is widely expected to be raised when the Federal Reserve meets on December 15-16.

"The Fed is pretty locked in regarding a hike next week and any fall in commodity prices will be seen as transitory factors," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

However, Hogan said a further plunge in oil prices and a stronger dollar could mean subsequent rate hikes will be gradual.

Just after midday in New York, the Dow Jones industrial average was down 175.32 points, or 0.98 per cent, at 17,672.31; the S&P 500 was down 21.17 points, or 1.01 per cent, at 2070.52; and the Nasdaq Composite was down 48.17 points, or 0.94 per cent, at 5094.10.

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Falling oil prices helped airline stocks, with JetBlue Airways up 4.1 per cent and Republic Airways up 2.9 per cent. The S&P 1500 airlines index hit its highest level since January.

Inaccurate forecasts of growth, employment and inflation by the Fed have pulled the central bank in conflicting directions and driven the decision to keep rates low for so long, St Louis Federal Reserve President James Bullard said.

Traders see a 79 per cent chance that the central bank will increase rates for the first time in nearly a decade, according to the CME Group's FedWatch.

Keurig Green Mountain's shares soared 73.1 per cent to US$89.51 ($135) after the coffee-pod maker agreed to be bought for about US$13.9 billion.

Office Depot slumped 13.9 per cent to US$5.71 after the NY Post reported that the government will vote to block its merger with Staples. Staples was down 9.6 per cent at US$11.17.


 - Reuters


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