Dow Jones suffers worst week since 2011: Dropping crude oil prices to blame

More than $1.2 trillion was erased from global equities over the five days, as the drop in crude oil below $58 a barrel raised concern over the strength of the global economy, according to a Dec. 13 Bloomberg news report.

With the gradual drop in oil prices since June, the Dow Jones Industrial Average (DJIA) had its worst week since 2011, volatility surged and fund managers said anxiety is building among clients and themselves. “This week was a bit of a game changer,” Marshall Front, chief investment officer and chairman of Front Barnett Associates LLC, said by phone in an interview with Bloomberg. “With oil prices falling there has to be a lot of reassessing going on.”

The Dow lost 677.96 points, or 3.8 percent, to 17,280.83. The Standard & Poor’s 500 Index slid 3.5 percent to 2,002.33, its biggest drop since May 2012. The MSCI All-Country World Index declined 3.8 percent, also the most since 2012. The worst rout in Greek equities since 1987 sent European shares to their biggest weekly slump in more than three years. Canadian stocks plunged 5.1 percent and Brazil entered a bear market, falling more than 20 percent from a September peak.

Philip Orlando, who helps oversee $350 billion as New York-based chief equity market strategist at Federated Investors Inc, told the Business Standard that he’d “re-run models” on Monday and see if a rebound materializes. “It may be that smart money heard things that the long money crowd didn’t that worked its way into the market in the last two hours,” Orlando said by phone. “Bottom line is, you pay attention to fundamentals and the fundamentals are solid, and then you look at your screen and you want to throw up.”

Besides the glum Dow Jones news, U.S. Treasuries rallied with 10-year yields reaching the lowest in eight weeks and the yen had its best week in 16 months.