U.S. Stocks Drop as Oil Extends Declines

All three major stock indexes are still on track to end the week with big gains

Image result for Oil well, sunset, photos

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U.S. stocks fell Friday as crude prices continued to lose ground a day after the U.S. oil benchmark entered a bear market.

The Dow Jones Industrial Average dropped 140 points, or 0.5%, to 26050. The S&P 500 lost 0.7%, and the tech-heavy Nasdaq Composite shed 1%. All three major indexes are still on track to end the week with big gains after a run-up in the wake of the midterm elections.

Nine of the 11 S&P 500 sectors dropped, led by energy and technology, which shed 1.9% and 1.3%, respectively.

U.S. oil prices continued to slide, dropping 2.2% to $59.34 a barrel after entering a bear market Thursday, a decline of more than 20% from their Oct. 3 high. Brent crude, the global benchmark, fell 1.9% to $69.32 a barrel, inching closer to a bear market.

Renewed concerns over rising global output and signs of deteriorating demand have weighed on crude prices this week. Data from Baker Hughes on the U.S. oil rig-count, viewed as a proxy for activity in the energy sector, is on tap Friday.

The selloff in oil has accelerated this week as U.S. oil inventories hit a five-month high. Delegates from the Organization of the Petroleum Exporting Countries will have those figures in mind when they meet with non-OPEC members this weekend in Abu Dhabi.

“Markets currently see dropping oil prices as sign of slowing global economy,” said Carsten Brzeski, chief economist at ING in Germany. “In my view, dropping oil prices should be rather positive, supporting consumption.”

A Canadian Natural Resources pump jack near Dorothy, Alberta.
A Canadian Natural Resources pump jack near Dorothy, Alberta. Photo: todd korol/Reuters

Markets had been watching to see whether October’s selloff or the recent softness in the housing market gained attention from the Fed’s board, said Mohammed Kazmi, portfolio manager at Geneva’s Union Bancaire Privée.

However, the central bank signaled comfort with its policy path on Thursday and expressed confidence that U.S. growth remained strong, Mr. Kazmi said, noting that the market has already priced in increases in December and next year.

The dollar gained after the Fed meeting and held steady on Friday. The WSJ Dollar Index, which measures the currency against a basket of 16 of its peers, was up 0.2%.

Yields on U.S. 10-year Treasurys edged down to 3.211% from 3.238% Thursday. Yields move inversely to prices.

In Friday’s action, shares of Dow component Walt Disney climbed 3% after the company posted a record profit.

Struggling conglomerate General Electric, which was removed from the blue-chip index earlier this year, slumped 3.8% after JPMorgan Chase lowered its price target to $6 a share.

Yelp shares tumbled 29% after the online-review company cut its revenue forecast on slower-than-expected growth in the number of merchants advertising on its platform. Dropbox shares jumped 8% after the web-storage company narrowed its losses in the third quarter and grew sales faster than Wall Street estimates.

Elsewhere, the Stoxx Europe 600 dropped 0.4%. Asian indexes also fell amid worries about China’s slowdown in economic growth. Hong Kong’s Hang Seng closed down 2.4%, the Shenzhen A Share index fell 0.4% and Japan’s Nikkei dropped 1.1%

Write to Jessica Menton at Jessica.Menton@wsj.com

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