By MATTHEW CRAFT
NEW YORK -- Falling oil prices dragged the stock market lower on Monday as Exxon Mobil (XOM), Chevron (CVX) and other big energy companies sank along with crude. The steep drop in oil prices over recent months has investors second-guessing expectations for the quarterly earnings season that starts this week.
Sam Stovall, the U.S. equity strategist at S&P Capital IQ, said that it seems that every day brings another drop in Wall Street's earnings forecasts. "What's happening is that we're seeing the very low bar for fourth-quarter earnings raising anxiety," Stovall said. "It's the continued decline in oil, but it's also that nearly half of the S&P 500's revenues come from overseas. Japan is in recession, and Europe is teetering on the edge of it."
The Standard & Poor's 500 index (^GPSC) lost 16.55 points, or 0.8 percent, to close at 2,028.26. The Dow Jones industrial average (^DJI) slid 96.53 points, or 0.5 percent, to 17,640.84, and the Nasdaq (^IXIC) composite lost 39.36 points, or 0.8 percent, to 4,664.71.
Oil Prices Predicted to Plummet
In a wide-ranging note to clients, Goldman Sachs (GS) slashed its forecast for oil prices. It now estimates that that crude will average $50.40 a barrel this year, far below its previous forecast of $83.75. It also trimmed its forecast for Brent crude, a type used in international markets, to $70 a barrel from $90.
Oil prices extended their slide, with U.S. crude losing $2.29 to settle at $46.07 a barrel. Brent lost $2.68 to $47.43. Both trade at their lowest levels since March of 2009. "I think we're going to see plenty more volatility in the coming days as pressure mounts on oil producers to scale back production before prices get dangerously low," said Craig Erlam, market analyst at Alpari.
Monday also marked the unofficial start to the fourth-quarter earnings season as Alcoa (AA) turned in its latest quarterly results after the closing bell. The aluminum producer reported stronger earnings and revenue than Wall Street expected, pushing the stock up 20 cents, or 1 percent, to $16.38 in extended trading. Analysts expect big corporations to turn in modest results for the fourth-quarter, forecasting earnings growth of 4.6 percent, according to S&P Capital IQ. Overall sales are expected to be meager, rising 2.3 percent, largely the result of sliding revenue for oil companies.
Traders are also looking ahead to Greece's general election on Jan. 25. Opinion polls show the Syriza party on track to win the election. Syriza wants to change the terms of the country's bailout agreement with lenders, but few think it will be able to govern without the support of other parties. Diminishing fears that Greece will drop the euro currency have helped take some pressure off the country's bond market. Major markets in Europe climbed. Germany's DAX gained 1.4 percent, while France's CAC-40 added 1.2 percent. Britain's FTSE 100 closed flat.
Back in the U.S., Tiffany & Co. (TIF) cut its outlook for annual profits and posted weaker sales in the holiday season, partially the result of a stronger U.S. dollar pinching results. The jewelry retailer's stock fell $14.44, or 14 percent, to $89.01, the biggest drop in the S&P 500.
AmerisourceBergen (ABC) announced plans to buy MWI Veterinary Supply (MWIV) for roughly $2.5 billion, or $190 a share. The deal would give the prescription-drug distributer a foothold in the growing business of veterinary medicine. MWI's stock jumped $14.35, or 8 percent, to $190, while AmerisourceBergen sank $2.07, or 2 percent, to $90.93.
In the bond market, prices for Treasurys rose, pushing the yield on the 10-year Treasury note down to 1.91 percent from 1.95 percent late Friday. In commodity trading, the price of gold gained $16.70 to settle at $1,232.80 an ounce, and silver rose 15 cents to $16.56 an ounce. Copper fell three cents to $2.73 an ounce. In other futures trading on the New York Mercantile Exchange:
- Wholesale gasoline fell 4.8 cents to close at $1.275 a gallon.
- Heating oil fell 4.9 cents to close at $1.654 a gallon.
- Natural gas fell 15.1 cents to close at $2.795 per 1,000 cubic feet.
What to watch Tuesday:
- The Labor Department releases the job openings and labor turnover survey for November at 10 a.m. Eastern time.
- The Treasury Department releases the federal budget for December at 2 p.m.