Stocks plunged from mid-September through mid-October before staging a sharp rebound that culminated with the Dow hitting a new all-time high just a week ago on the back of a strong U.S. jobs report.
Heading into this week, many investors were predicting that the Dow would soon top 18,000 for the first time.
But the sharp sell-off in oil has changed all that. Crude prices are now below $58 a barrel, their lowest level in more than five years. Energy stocks have been hit hard as a result.
However, oil stocks were not the only big losers on Friday -- and that could be a sign that investors are growing more nervous about the overall market and weaker global economic demand.
Cyclical industrial stocks Caterpillar (CAT) and DuPont (DD) both dropped more than 2% along with fellow Dow components Exxon Mobil (XOM) and Chevron (CVX) Friday. Mining firm Joy Global (JOY) and chemical companies Dow (DOW) and Eastman (EMN) were among the worst performers in the S&P 500.
It will be interesting to see how much longer this trend can last. If oil prices continue to drop and the economies of Europe, Asia and Latin America weaken further, that eventually has to hurt the U.S. economy a little bit.
И как результат, падение цены на нефть приведет к массированному сокращению высокооплачиваемых рабочих мест. Энергертический сектор создал 15% рабочих мест за последние годы, составляя менее 1% от всех рабочих мест
Bad news already started to flow this week: Halliburton (HAL) affirmed that it plans to cut 1,000 positions due to the depressed oil market, and BP (BP) announced an unspecified number of layoffs as part of a $1 billion restructuring plan.
More cuts are almost certainly on their way.
On Monday, ConocoPhillips (COP) became the first major U.S. oil company to reveal that it is slashing spending for 2015, a decision the CEO asserted was "prudent given the current environment."
It's true the job losses aren't widespread yet. Oil would have to fall a lot further for many energy companies to become unprofitable. And economists say cheap gas is akin to a $60 billion gas cut to consumers.
But there are reasons to worry. The U.S. shale oil boom has become such a key driver of the economy in recent years, creating well-paying jobs at a time when other industries were scaling back.
According to Fatima Iqbal of Azzad Asset Management, over 15% of total employment gains since the beginning of 2008 have come from the energy industry, even though it is less than 1% of the country's job base.
Fadel Gheit, an oil and gas analyst at Oppenheimer and Co., is far more pessimistic. He thinks a lot of energy companies are out of touch with reality.
"Everybody is talking about $75 oil...maybe they're living on another planet," he said. Oil is currently trading around $58.
His reasoning: Saudi Arabia, OPEC's biggest producer, is now basing its national budget on $60 oil. Kuwait, another heavy hitter in the cartel, is budgeting for $55. That means they're digging in for the long haul.