With oil falling to a seven-year low again, U.S. stocks fell this week as the slump in commodity prices continues to tamp down investor confidence.
On Tuesday, U.S. stocks fell for the second consecutive day. The Dow Jones industrial average fell 0.9% and 162.51 points; the SandP 500 fell 0.7% and 13.48 points; and the Nasdaq composite fell 0.1% and just 3.6 points.
Under-performing trade figures in China prompted selling there, which spread to key European stock indexes, which all fell by more than 1%. Those losses continued Tuesday morning in the U.S., although afternoon trading made up most of the early losses.
The commodity slump isn’t the only source of concern on Wall Street. This year has seen a string of disappointing technology IPOs. In these initial public offerings, companies offer about 10-15% of the company for sale to raise capital. While companies like athletic equipment manufacturer FitBit saw successful IPOs this year, other big IPOs saw disappointing results.
On Tuesday, oil was at the center of the latest disappointing day in trading once more. A glut in crude oil supplies around the world has led to the price of U.S. benchmark crude oil hitting previously unthinkable lows. The further oil prices fall, the less profitable it becomes for energy companies to continue expensive exploration and extraction activities.
“The energy sector has done a good job grappling with mid-$40 oil, but it’s tougher as you go under $40,” said Doug Cote with Voya Investment Management. “The energy sector is having trouble adapting.”
So, too, are investors. Following 18 months of falling oil prices, U.S. crude oil is now worth just $37.51 a barrel, and commodities analysts expect prices to remain bottomed out until at least early 2017.
Oil producers and technology startups aren’t the only companies struggling this year on the trading room floor. When the Chinese economy was growing more quickly several years ago, raw material suppliers also increased production. But after a stock market crisis in China earlier this year, the world’s second largest economy is importing fewer raw materials as its exports drop.
Now commodities like iron ore, copper, and other mining stocks are struggling on the Dow Jones Industrial Average and other major indexes.
Still, despite these trouble spots, most experts expect the U.S. Federal Reserve to finally raise rates by the end of the year.