The Dow Jones plummeted over 300 points, and the Euro fell drastically to a nine-year low. The S&P and European indices also felt the sting. According to traders, the culprits are falling oil prices and Greece, again.
Oil slipped below $50 a barrel Monday, seemingly acting as a catalyst for the Dow Jones sell-off.
Although cheap oil, and therefore cheap gas, is great for consumers, as USA Today explains, it’s more complicated for corporations. The energy sector in the Standard and Poor’s 500 dropped 26.6 percent in December of 2014 compared to the same month in 2013.
That malaise spread into the financial and industrial stocks, hastening the sell-off.
There appears to be little hope for oil prices to bounce back up and bolster the Dow Jones anytime in the near future. According to The Street, OPEC has failed to set production limits that would have siphoned off the still increasing supply of oil. Likewise, Russia reported that its production has hit a post-USSR high; the U.S. also continues to up its drilling efforts.
James Abate, chief investment officer of Centre Funds, explained how the oil price is bad news for the Dow, despite obvious benefits for consumers.
“The price of gold is higher and price of oil is down significantly. That’s an unusual combination. What it signifiies to me is the fact that, contrary to the expected broad-based positive stimulative benefits to the consumer portion of the economy, the continuing sharp collapse in oil prices is indicative of a economic slowdown due to falling demand.”
But oil is only part of the problem for the Dow Jones.
The Euro has stumbled on news that Greece may once again threaten to leave the currency union.
For five years the Greek economy has been in desperate recession, receiving massive aid packages from the IMF and Eurozone, but unable to breathe under the harsh austerity measures. One of the results has been a polarized political system.
Greece’s parliament was unable to decide on a new president, prompting a new round of elections on January 25. Furthermore, the Syria party, which is adamantly against the EU’s austerity measures, has risen in popularity. Forcing Greek politicians to seriously consider leaving the EU, instantly giving investors on the Dow Jones shivers.
Stan Shamu, market strategist, says people are now watching to see what Greece and the EU will do in the coming days.
“Comments made by Greek Prime Minister Samaras suggesting the country’s euro membership is on edge heading into the January 25 election and a Der Spiegel report saying Merkel is willing to accept a Greek exit sent the euro lower.”
As previously reported by the Inquisitr, the stock market in general may be in for a rocky road in 2015. Although employment is up, and gas prices are down, the Dow Jones may struggle to keep America’s bull market in gear.
[Image Credit: Eric Kounce/Wikimedia Commons]