Oil prices plunge 6% as stocks give up gains and sink

January 12 02:33 2016

Wall Street kicks off the second week of 2016 on edge, as oil prices plunged even further and stocks continue to drop after suffering the market’s worst start to a year ever last week. Stocks initially shrugged off more turbulence in the mainland China stock market overnight, where shares plunged 5.3% after last week’s 10% drubbing on growth fears, and jumped at the open only to see the gains evaporate later in the morning.635537951629891777-AP-Norway-Satoil-Arctic-Drilling

The Dow Jones industrial average was down 60 points, or 0.4%, in afternoon trading after being up as much as 115 points. The broader Standard & Poor’s 500 stock index slid 0.8% as the broad-based index fell into correction territory. The Nasdaq composite index gave up a 40-point gain and was down about 50 points, or 1.2%. The energy sector once again led the market lower as oil prices tumbled further, falling below $31 a  barrel. U.S. crude fell 6.5% to $30.96 a barrel.

The main problem haunting Wall Street and global markets is the specter of a slowing economy in China, the world’s second-biggest economy which has been a major driver of global growth in recent years. Investors are still hoping the U.S. stock market can eventually stabilize after a horrific start to the year last week, when the Dow tumbled 6.2%, the Standard & Poor’s 500 fell 6% and the broad market, as measured by the Wilshire 5000 Total Market Index, suffered a paper loss of $1.5 trillion.

But Wall Street pros stress that a rapid rebound likely won’t occur, even though a relief rally at some point could materialize due to the extreme oversold nature of the market. Ari Wald, a technical analyst at Oppenheimer, who correctly called a correction in the first quarter of this year, says “caution remains warranted.” “The key message is more time is needed before the strength can be sustained,” he told clients in a note ahead of today’s opening bell. Wall Street will also be watching the start of the fourth-quarter earnings reporting season, which unofficially kicks off after today’s closing bell with a report from aluminum maker Alcoa. Like the past two quarters, analysts are projecting negative growth for the quarter. Shares in Europe were mixed as the Stoxx Europe 600, a broad European stock gauge that tumbled 6.7% last week, was down 0.1%.