U.S. stocks dropped Tuesday as energy company shares weakened, a day after the Dow Jones Industrial Average tumbled as much as 350 points, and crude oil prices sank to a five-year low. U.S. crude oil prices fell under $49 a barrel Tuesday, its lowest level since 2009, while Brent crude, the global benchmark for oil prices, dropped briefly below $52 a barrel for first time in more than five-and-a-half years.
In midday trading, the Dow Jones Industrial Average, which measures the share prices of 30 large industrial companies, dropped 133.06 points, or 0.76 percent, to 17,369.81; the S&P 500 stock index lost 15.46, or 0.76 percent, to 2,005.20. The tech-heavy Nasdaq Composite fell 52.73 points, or 1.13 percent, to 4,600.04.
West Texas Intermediate crude, the benchmark for U.S. oil prices, dropped 2.42 percent Tuesday to $48.83 a barrel, for Feb. 15 delivery, on the New York Mercantile Exchange, its lowest price since 2009. Brent crude dropped 1.81 percent Tuesday to $52.15 a barrel, for Feb. 15 delivery, on the London ICE Futures Exchange.
“There is no compelling reason why oil prices cannot fall further in the near term, but the current market panic looks increasingly overdone,” London-based research consultants Capital Economics said in a research note Tuesday. “Other commodity prices have held up relatively well. We therefore continue to expect Brent to average around $60 per barrel over the next year or so.”
Tuesday's market action came amid a mixed picture of the U.S. services sector. The ISM non-manufacturing index, which monitors U.S. economic conditions, fell to 56.2 in December, compared with 59.3 in November. Last month’s figure fell just shy of Wall Street estimates, as economists had expected the index to fall to 58.5, according to analysts polled by Thomson Reuters.
Separate data showed growth in the U.S. service sector eased to a 10-month low in December, signaling the weakest rise in business activity since February 2014. The final Markit U.S. Services Business Activity Index recorded a 53.3 in December, compared with an earlier "flash" reading of 53.6, down from 56.2 in November and the lowest since last February.
This is not just a one-month wobble: The pace of growth has now slowed for six consecutive months. “The U.S. economy lost significant growth momentum at the close of the year,” Chris Williamson, chief economist at Markit, said in the report. "The PMI surveys act as good leading indicators of GDP data, and suggest that the pace of U.S. economic growth will have slowed in the fourth quarter.”
The report comes ahead of Friday’s highly anticipated jobs report for December. Economists expect the report to show U.S. employers added 240,000 jobs in December, down from 321,000 in November, according to analysts polled by Thomson Reuters.
Separately, shares of multimedia corporation AOL Inc. jumped more than 4 percent to $46.85 Tuesday following a Bloomberg report that Verizon Communications Inc. approached the Internet company for a possible takeover or joint venture. Verizon’s shares on Tuesday edged up 0.32 percent to $46.71.