A slump in oil prices sparked a global sell-off in financial markets on Friday with losses spreading from Asia to Europe to the United States, where stocks fell sharply to cap their worst week since the summer.
The selling was broad, with all 10 sectors of the Standard & Poor’s 500 index ending down. The Dow Jones industrial average fell 309.54 points, or 1.76 percent, to 17,265.21.
Fearful investors put their money in government bonds, especially U.S. Treasurys. Another measure of fear in the markets, the so-called Vix index, jumped and is now up 70 percent in just five days.
Investors worry the sharp fall in the price of oil and other commodities is a sign of weakness in the global economy, especially China, and that a weakening economy will cut into profits at big energy companies and suppliers of raw materials as well as other companies.
“We’re stockpiling commodities, and demand is not picking up,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors. “It’s kind of a depressing market.”
Energy shares, already decimated this year, fell 3.4 percent on Friday. Southwestern Energy plunged 14 percent. Freeport McMoRan, a mining giant, dropped 6 percent.
The trouble began with a report from the International Energy Agency that said the oversupply in oil would persist until late next year even as demand continues to weaken. Benchmark U.S. crude plunged $1.14, or 3 percent, to close at $35.62 a barrel in New York. It has been falling for 1 1/2 years and is now at its lowest level since early 2009.
By the end of the day, the Standard & Poor’s 500 index lost 1.94 percent to close at 2,012.37. It was down 3.8 percent for the week, its worst showing since August. The Nasdaq composite declined 2.21 percent, to 4,933.47.
Investors were also rattled by trouble in a risky corner of the credit markets where bonds from heavily indebted companies are traded. Their prices have fallen sharply as investors fear the companies that issued the bonds might default. A fund that tracks the bonds, the iShares iBoxx USD High Yield Corporate Bond ETF, dropped nearly 4 percent in five days.
Investors were also focused on a Federal Reserve meeting next week where the central bank is widely expected to announce an increase in its benchmark interest rate from a record low.
Recent economic reports indicate that the U.S. economy is healthy enough to withstand a rate hike, but investors are still nervous because it would be the first rate rise in nearly a decade.
“It’s anticipation of the Fed, it’s oil, it’s credit . . . all of these factors are putting fear and confusion into the investor,” said Jonathan D. Corpina, senior managing partner at Meridian Equity Partners.