Oil price drop crimps energy profits, drags down stocks
— -- Troubles in the oil patch are spilling into Wall Street as investors worry the same things hurting crude prices will injure the stock market, too.
Slack worldwide demand for energy and concern that the economic recovery will be slower than hoped are pushing oil prices down and threatening the profits and stock prices of energy companies.
That's discouraging investors from buying energy — and even non-energy — stocks. The Dow Jones industrial average sank 1.6% last week, bringing its 2009 loss to 7.2%.
"Investors expected a V-shaped economic recovery," says Stephen Wood of Russell Investments, describing the hopes some traders had that the economy would spring back to life. "Things aren't as bad as feared, but not as good as hoped."
Oil prices are at the epicenter of investors' cautious view of the economy's recovery. A barrel of oil fell more than 10% last week to $59.89, cracking below $60 for the first time since May 19. Friday the International Energy Agency said demand for oil is likely to drop 2.9% this year.
The strain on energy stocks is highlighting concerns investors have with stocks in general, including:
The weakness in energy stocks is a worry because the sector accounts for more than 12% of the market value of the S&P 500. Energy stocks are a big reason the S&P 500 is down 7.1% from its high this year in June.
Related Stories
ABC News Live