Equities drop on energy weight; dollar climbs

Thu Dec 17, 2015 4:51pm EST
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By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks led a decline in most equity markets around the globe on Thursday, a day after the Federal Reserve's first interest rate hike in nearly a decade, as continued pressure on oil weighed on the energy sector.

The long-expected but modest increase in the federal funds rate also boosted the dollar to a fresh two-week high against a basket of major currencies, while Wall Street snapped a three-day rally.

Economic data pointed to continued healing in the labor market, which could prompt more rate hikes from the Fed next year. However, the manufacturing sector continues to struggle, creating some nervousness among investors.

Brent and U.S. crude oil prices fell and remained near multi-year lows after fresh supply builds at the delivery point for U.S. crude futures added to worries about a global glut and strength in the dollar. Brent settled down 0.9 percent at $37.06 while U.S. crude settled down 1.6 percent at $34.95 a barrel.

The oil woes helped push U.S. equities lower after rallying on Wednesday, with the S&P energy index .SPNY down 2.5 percent as the worst performing of the 10 major S&P sectors.

"I think what we’re going to see through the end of the year is a refocus on oil and commodities," said Karen Hiatt, senior portfolio manager at Allianz Global Investors in San Francisco.

"The market is still continuing to want to migrate toward more defensive, more visible earnings-type companies or sectors."

Stocks in Europe gained, however, as investors overseas took the Fed hike as a sign of confidence in the world's largest economy.   Continued...

Traders work on the floor of the New York Stock Exchange in New York, December 16, 2015. REUTERS/Brendan McDermid