U.S. stocks sank Friday, with the Standard & Poor’s 500 Index capping its biggest weekly drop in 2 1/2 years, as oil continued to slide and Chinese industrial data raised concern over a global economic slowdown.
The S&P 500 lost 1.6 percent to close at 2,002.59, extending losses in the final hour to cap a weekly loss of 3.5 percent. The Dow Jones Industrial Average sank 312.04 points, or 1.8 percent, to 17,284.3.
The Dow slid 3.8 percent in the week, its biggest decline in three years. Trading in S&P 500 companies was 22 percent above the 30-day average for this time of the day.
“People are still nervous about the oil price, and the European situation is worrisome,” John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $230 billion, said in a phone interview. “Consumer confidence numbers look good and retail sales were pretty strong yesterday – the domestic picture is encouraging – but one school of thought is that the rest of the world is going to drag the U.S. down with it.”
More than $1 trillion was erased from the value of global equities this week as oil prices tumbled, raising concern over the strength of the global economy. Oil extended losses Friday amid speculation that OPEC’s biggest members will defend market share against U.S. shale producers. The International Energy Agency cut its forecast for global oil demand for the fourth time in five months.
The Chicago Board Options Exchange Volatility Index, a measure of the cost of options on the S&P 500 known as the VIX, has jumped 84 percent this week, on track for its biggest weekly rally in more than four years.
Stocks around the world fell Friday after November Chinese factory production slowed more than estimated. Data showing a 7.2 percent gain from the year before missed the 7.5 percent median estimate in a Bloomberg News survey. The Stoxx Europe 600 Index plunged 2.6 percent Friday and 5.8 percent over five days, its worst week in three years.
U.S. equities briefly pared losses as a report showed consumer confidence improved this month. The Thomson Reuters/University of Michigan preliminary December index of consumer sentiment increased to 93.8 from 88.8 last month. The median projection in a Bloomberg survey of 69 economists called for an advance to 89.5.
A separate report showed wholesale prices fell more than forecast in November, led by the biggest drop in energy costs in more than a year, signaling inflation pressures remain weak even as the world’s largest economy is expanding. The 0.2 percent decrease in the producer-price index followed a 0.2 percent advance in the prior month, the Labor Department data showed.
Oil at a five-year low and slowing overseas markets will subdue prices in the production chain that feed into the cost of living. Persistently weak inflation has allowed Federal Reserve policymakers, who are scheduled to meet next week, room to keep interest rates near zero after ending monthly asset purchases in October as the economy strengthens.
“With falling oil prices and the stronger dollar, pipeline pressures are minimal,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “There’s no real threat of higher inflation. The Fed has a lot more leeway.”