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Monday, March 18, 2024
March 18, 2024

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Energy sector slide drags stock prices lower

The Columbian
Published:

NEW YORK — Stocks fell broadly on Wednesday, snapping a four-day winning streak for the Standard & Poor’s 500 index, as investors shaken by recent swings in the market sold some of their holdings.

A slide in the price of oil dragged down energy stocks. Eight of the 10 industry groups in the S&P 500 fell, led by a 1.7 percent drop in energy. Small-company stocks also fell as traders unloaded riskier assets.

“The market is still nervous,” said John Manley, chief equity strategist at Wells Fargo Funds Management. “The extreme volatility of the last few weeks is on our minds.”

The drop in the S&P 500 came a day after the index’s biggest gain this year.

Stocks were higher most of the morning on hopes that the European Central Bank would add to its stimulus program as well as news that U.S. inflation remained low last month. A batch of good earnings reports from U.S. companies also helped.

Those gains vanished in the afternoon as the price of crude oil began to drop. Traders have worried about a steady decline in oil as global demand for energy recedes.

“The market is taking a bit of breather,” shrugged TD Ameritrade Chief Strategist JJ Kinahan. “People are reassessing what their expectations should be for the rest of the earnings season.”

The S&P 500 dropped 14.17 points, or 0.7 percent, to 1,927.11. The Dow Jones industrial average fell 153.49 points, or 0.9 percent, to 16,461.32. The Nasdaq composite fell 36.63 points, or 0.8 percent, to 4,382.85.

The losses were mitigated by a batch of generally positive third-quarter earnings reports, which suggested that corporate profits were still growing at a healthy clip. Yahoo jumped 5 percent after reporting blowout earnings.

The Vix index, a gauge of expected swings in stock prices, surged nearly two points to 18. That is above the recent average of 15, but far below last week’s high of 30.

So far this earnings season, investors have been encouraged. With about a fifth of S&P 500 companies out with their results and outlooks, stocks look reasonably priced as measured by expectations of future earnings. The index is trading at 15.8 times expected earnings per share over the next 12 months, according to S&P Capital IQ, a research firm. That is not much lower — meaning cheaper — than the average of 16.4 since 2001.

But other measures, comparing stock prices to earnings over the past 10 years, for instance, suggest the market may be overvalued.

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