The U.S. stock market tumbled last week, capped by a 315-point drop by the Dow Jones Industrial Average on Friday.
The Dow’s weekly drop of 3.7 percent was the worst weekly decline in three years. The S&P 500 Index lost 1.6 percent, while the Nasdaq Composite slid 1.2 percent.
Losses were most extreme in the materials sectors, which slipped 2.9 percent. That was followed by the energy sector’s losses of 2.2 percent due to a continuing swoon in oil prices.
Oil prices were the chief culprit. Crude has been in free fall for weeks, and sank to a five-year low last Friday as the International Energy Agency cut its demand forecast for 2015.
But there’s more to the sell-off than oil. What started as an oversupply in the oil market has turned into a fear of a global economic slowdown, despite signs pointing to an expanding economy in the United States.
Experts are divided as to whether oil’s plunge is good for the economy. On one hand, it increases disposable income for consumers and is a boon to retailers and the transportation industry. But such a drastic slide in oil prices raises questions of whether the global economy is indeed on a path of growth. It also threatens the recent boon in U.S. energy industry jobs. Even the transportation sector—which benefits from lower oil prices—is experiencing a sell-off of its own. The Dow Jones Transportation Average lost 3.4 percent last week.
These issues portend to greater investor uncertainty going forward. The Chicago Board Options Exchange Volatility Index (VIX), a measure of implied market volatility, rose almost 80 percent last week. Often known as the “fear gauge,” VIX is a common measurement of expected market volatility over the next 30 days.
