Stocks swung from gains to losses and almost back again on Tuesday.
The U.S. market opened the day higher, getting a boost from encouraging news on hiring and small business confidence. The market then swooned in the afternoon as oil closed lower. The pendulum then swung back late in the day as oil gained in after-hours trading and stocks ended with small losses.
From peak to trough, the Dow Jones industrial average swung 425 points.
Stocks are having a jumpy start to the year as investors grapple with the potential impact of oil's plunge. The outlook for global growth also remains fuzzy as the U.S. recovery continues, but economies in Europe and Asia struggle.
Even though stock market volatility has picked up at the start of the year, investors should remain calm, said Janet Dougherty, a global investment specialist in Chicago at JPMorgan private bank.
“You have to remember that we've been through an extended period where there wasn't a lot of volatility in the equity markets, and now we're just getting back to normalized levels,” Dougherty said.
The Standard & Poor's 500 index eased 5.23 points, or 0.3%, to 2,023.03. The Dow fell 27.16 points, or 0.15%, to 17,613.68. The Nasdaq composite slipped 3.21 points, or less than 0.1%, to 4,661.50.
Oil fell Tuesday after the energy minister for the United Arab Emirates said Tuesday there are no plans for OPEC to curb production to shore up falling crude prices. The price of oil has slumped almost 60% since last June as traders bet that the supply glut will persist.
Benchmark U.S. crude fell 18 cents to close at $45.89 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 84 cents to close at $46.59 in London.
“At a certain point oil has got to find a bottom,” said Jeffrey Carbone, a partner at Cornerstone, a wealth manager. “But for that to happen, somebody is going to have to flinch and cut production.”
While falling oil prices are good for consumers, putting more money in their pockets, they mean lower earnings for energy companies. That can also have a knock-on effect in areas of the country where jobs are dependent on oil production. Some investors are also worried that the slump in prices is signaling a weakening global economy.
Still, many analysts say that, on balance, lower oil prices will turn out to be a boon to the overall economy.
“The positive impact from consumers having more money to spend on other things, and the associated hiring elsewhere…will likely more than offset the slowdown, or contraction, in the oil industry,” said Kate Warne, investment strategist at Edward Jones.
The market also took a hit after the CEO of KB Homes said that his company was experiencing soft demand in some markets. The comments caused the stock to plunge, dragging other homebuilders lower.
KB Home ended the day down $2.70, or 16.3%, at $13.87. The Standard & Poor's home building index dropped 3%.
The market's initial rise came after a survey by the U.S. Labor Department showed that employers advertised the most job openings in nearly 14 years in November. That suggests businesses are determined to keep adding staff because they are confident that strong economic growth will create more demand for goods and services.
A second survey also lifted investor spirits by showing that small business showed confidence rose to an 8-year high in December.
Among individual stocks, McGraw Hill Financial, the owner of the Standard & Poor's bond rating company, was the biggest gainer, rising $5.13, or 6%, to $90.89. The gains followed reports that the company was close to reaching a $1 billion settlement with the U.S. government for allegedly misleading investors about its ratings of bonds backed by subprime mortgages.
In government bond trading, the yield on the 10-year Treasury note fell to 1.90% from 1.91% on Monday.
The dollar gained against the euro but dropped against the yen. The euro fell 0.5% to $1.1775 and the dollar slipped 0.2% to 117.89 Japanese yen.
In metals trading, prices were mixed. Gold rose $1.60, or 0.1%, to $1,234.40 an ounce. Silver gained 59 cents, or 3.6%, to $17.15 an ounce. Copper fell 8 cents, or 3%, to $2.64 a pounds.
In other energy trading:
— Wholesale gasoline fell 0.6 cent to close at $1.269 a gallon.
— Heating oil fell 2.1 cents to close at $1.633 a gallon.
— Natural gas rose 14.8 cents to close at $2.943 per 1,000 cubic feet.