{UAH} Edward Mulindwa, watch and learn!!!!!Dow slips nearly 600 points more, as stocks finish their worst week since March

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Russian Energy Minister Alexander Novak and UAE's Oil Minister Suhail Mohamed Al Mazrouei and OPEC Secretary General Mohammad Barkindo attend a meeting in the OPEC headquarters in Vienna. (Leonhard Foeger/Reuters)
By Thomas Heath December 7 at 4:04 PM
Oil prices spiked and stocks dove on Friday as uncertainty roiled global markets.

The Dow Jones industrial average slid 559 points, or 2.2 percent, to 24,388 on a disappointing jobs report Friday morning that seemed to cement worries that an economic slowdown is ahead.

The Standard and Poor's 500-stock index was down 2.2 percent and the Nasdaq Composite retreated 3 percent Friday, adding to a wild week in which the major indices fell more than 4 percent. Some, like the Nasdaq, have hit correction territory, or a decline of 10 percent from a 52-week high. The S&P 500 is close to that mark with a 9.5 percent decline from its recent high.

"Uncertainty remains with us, and so does the volatility," said Michael Farr, a Washington investment manager. "We realize there is not any sort of a trade resolution with China. We aren't any further along than we were before the G-20 meeting. But we have the added uncertainty of the president's communication style."

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Technology and financial sectors were among the sectors that were hurt the most. Chip stocks were getting shellacked for their worst week since March. Apple dropped another 3.4 percent in afternoon trading. The iPhone maker is in retreat for the ninth of the last 10 weeks.

The siege on technology continued. IBM, Intel and Microsoft were among the biggest drags on the Dow 30, each down more than 3 percent in afternoon trading.

Stock losses appeared to deepen about 11 a.m. Friday after Trump trade adviser Peter Navarro said the administration would consider raising tariffs on Chinese goods if trade issues are not resolved during the 90-day negotiating period.


The technology sector that has powered the last years of the bull market is taking much of the beating, in part because tech companies tend to rely heavily on overseas markets, including China, to sell their products.

The tech sector finished down 5.07 percent for the week, off 14.14 percent from the Sept. 20 high, according to Howard Silverblatt, a senior index analyst with S&P Dow Jones Indices. Technology is still up 2.12 percent this year and up 41.3 percent since the Nov. 8, 2016 election.

Kristina Hooper, global market strategist for Invesco, said a confluence of events pushed stocks lower Friday.

She singled out the labor report that showed November private-sector job gains of 155,000 versus the 198,000 that were expected. But wage growth continued to show year-over-year gains of more than 3 percent.


"The economy may be slowing and inflationary pressures may be building, which in turn means the Fed may have less flexibility to take its foot off the accelerator," Hooper said.

If the Federal Reserve continues to raise interest rates, it could slow the economy, send it into recession and tank the stock market.

The unemployment rate held at 3.7 percent last month, a 49-year low.

Oil prices reversed their weeks-long decline Friday on an announcement by the Organization of the Petroleum Exporting Countries to cut production by 1.2 million barrels per day.

"They struck an accord that will bring some balance back to the market," oil analyst John Kilduff of Again Capital said. "The prices at the pump are going to stop going down as a result of this meeting."


International benchmark Brent crude and U.S. West Texas Intermediate crude both rose on the news. Brent was selling above $63 and U.S. crude was selling for $53.75 a barrel.

Experts consider $50 a key threshold because many producers cannot turn a profit if prices go much below that number.

"Our guiding principle is balancing supply and demand," Saudi Arabia Energy Minister Khalid Al-Falih said at a news conference in Vienna. "We don't always get it right. But we always adjust to try to . . . keep the market within a reasonable corridor."

Al-Falih called 1.2 million "the headline number," with 800,000 barrels per day in cuts being borne by OPEC "and 400,000 from our colleagues in non-OPEC."


The cuts are an attempt to stem the global oversupply that has driven oil prices down by 30 percent in the past two months. The cuts come in the face of repeated jawboning by President Trump, who has urged the 15-member cartel and Saudia Arabia — OPEC's def facto leader — not to cut production. Prices would remain relatively low without cuts in production.

The reduction was announced on the second day of a two-day meeting at OPEC headquarters in Vienna and is good news for producers. Anything short of 1 million barrels per day would have been disappointing for OPEC members.

"The deal came close to falling apart," Kilduff said. "The amount is large enough that it should help ease the current oversupply. The continued growth in U.S. output and exports remains a problem for OPEC and Russia, however."

The global oil terrain has changed dramatically in recent years. The United States, once written off as an exporter, is now the world's biggest oil producer and is a net exporter of petroleum.

The next two Big Three oil producers, Russia and Saudi Arabia, have sought to keep oil production and demand in rough proximity in order to stabilize prices in the $70 to $80 price range. The sweet spot in oil prices is $80 per barrel, which allows producers to make profits without consuming countries revolting over being gouged.

Trump earlier this week took to Twitter to weigh in: "Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!"

Trump has repeatedly linked support for Saudis, including support for the war in Yemen and his refusal to blame Crown Prince Mohammed bin Salman for the murder of journalist Jamal Khashoggi, to their cooperation in keeping oil prices low.

"Saudi Arabia, if we broke with them, I think your oil prices would go through the roof," he said last month, indicating he had an agreement with Riyadh not to cut production. "I've kept them down. They've helped me keep them down."

"Right now we have oil prices in great shape," Trump told reporters. "I'm not going to destroy the world economy, and I'm not going to destroy the economy for our country by being foolish with Saudi Arabia."

World oil supply and demand are roughly 100 million barrels per day, with OPEC contributing more than a third of that. The result is a very tight sliver between worldwide supply and demand. That means any increase in demand or a decline in production in some corner of the world can send prices upward.

The current surplus is largely attributed to a miscalculation between demand and output by major producers, including Iran. A strong dollar is also weighing on oil prices because it makes oil more expensive for much of the world. Oil prices tend to fall as a result.

Al-Falih said Saudi Arabia pumped 10.7 million barrels per day in October and 11.1 million in November. It is believed the number will come down to 10.2 million starting in January.

The new number "is partly driven by our commitment to start on the right foot in 2019 and to demonstrate this agreement is not going to take a long, protracted period of gradually winding down," Al-Falih said.

Several U.S. producer companies have been shellacked by the price decline. Small- and medium-size independent oil companies that rely on fracking are seeing their profit margins erode, which is hurting stock prices.

Pavel Molchanov, an energy analyst at the investment firm Raymond James, said "the key question is always implementation. How much compliance there will be? We will begin to see evidence of that early in the new year."

"Even after today's rebound, the price is 25 percent lower that it was two months ago," Molchanov said. "There is room for oil prices to continue to bounce into the early months of the new year. However, a full recovery to where oil prices were two months ago is most likely to be in the second half of 2019."

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Thomas Heath
Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington metropolitan area. Previously, he wrote about the business of sports for The Washington Post's sports section for most of a decade. Follow
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