Major U.S. indices pared some of Tuesday’s gains as the price of crude oil plummeted amid an oil glut that some analysts don’t expect to see tightening until 2020. Crude oil lost 3.1 percent to finish at $36.70.
Although trading volume has been light, the drop in crude pushed the Dow Jones Industrial Average down 117 points, or 0.7 percent, to close at 17,603 while the S&P 500 fell 0.7 percent to 2,063. Stock price decreases in the retail sector were broad and ranged from 0.7 percent to 2 percent. The S&P Retailing Industry Group Index also lost 0.7 percent to close at 1,299.
In the retail sector, Sears Holdings Corp. fell 3.3 percent to $20.29 while J.C. Penney & Co. Inc. dropped 1.1 percent to close at $6.76. Finish Line Inc. finished the day down 2.1 percent to $18.06.
There were gainers, though, as The Bon-Ton Stores Inc. rose 2.4 percent to end the day at $2.11. Bebe Stores Inc. gained 6.3 percent to 58 cents. Earlier in the day, the retailer said it received a notice from the Nasdaq Stock Market that it is not in compliance with Nasdaq’s listing rule.
The women’s specialty chain’s stock has been trading at below $1 a share for more than 30 days. Bebe has 180 days, or until June 21, to comply with the minimum bid price requirement. That means shares of Bebe’s common stock must meet or exceed $1 a share for at least 10 consecutive business days during the 180-day grace period.
Bebe said that in anticipation of the noncompliance, it held its annual shareholders’ meeting on Dec. 15. The shareholders approved an amendment to the common stock that would allow for a reverse stock split at a ratio of no less than one-for-three and not more than one-for-10, as well as to proportionately decrease the number of authorized shares of its common stock.
Regarding sinking oil prices, the Energy Information Administration noted a rise in crude oil stockpiles in the U.S. while analyst reports out of the Middle East indicated that the major oil-producing nations had no plans for slowing production — further adding to the glut.
The impact of cheap oil on consumers is that it essentially serves as a tax break for shoppers. Over the past year, the so-called “gas dividend” put more money in the pockets of consumers, who spent it on eating dinner out more as well as on bigger-ticket items such as autos and SUVs. But cheap oil also erodes profits in the energy sector, which is a key component of the U.S. economy.
For the new year, Chris Christopher, director of consumer economics at IHS Global Insight, believes cheap gas will strengthen consumer confidence and spending, too.
“Much of the increase in consumer confidence in the New Year is likely to come from the low-income and middle-income households, due to lower energy prices and increasing real median household income,” Christopher said in his consumer confidence research note. “The broadening income gains will assist in the more even expansion of consumer spending over the next couple of years.”