Market Insider

Stocks could shake off oil funk

BlackRock's 2015 outlook

Falling oil prices sent stocks reeling, but analysts say the market could fend off a bigger swoon for now, if simply because of the time of year.

The S&P 500 tumbled 33 points or 1.6 percent to 2026 Wednesday, as West Texas Intermediate futures for January plummeted 4.5 percent to $60.94 per barrel. The $60 level has been psychological import, and analysts say prices could keep falling.

"With three weeks left in the year, these are precious dollars for portfolio managers," said Peter Boockvar, chief market analyst with the Lindsey Group. "I think that's helped exaggerate every move. It's exaggerated oil and gas, as everyone clears their books and takes tax losses. There's an underlying fragility here that the drop in oil prices is bringing to light."

Boockvar said the market could be lifted by year-end window dressing, but could then be forced to pay up later: "This is highlighting that the earlier part of the year is going to be a challenge."

Read More With $60 oil, expect some US shale restructuring: Analyst

Besides oil prices, traders will be watching key U.S. retail sales data Thursday, expected at 8:30 a.m. ET. Retail sales should show the benefit of falling energy prices, and should give more clues about how well holiday sales are faring. Weekly jobless claims and import prices are also expected at 8:30 a.m. Business inventories are due at 10 a.m.

Oil was slightly higher Thursday evening, after plummeting during the trading day. U.S. stock futures were barely changed, but edged higher in evening trading.

Crude prices fell sharply Wednesday after OPEC (Organization of Petroleum Exporting Countries) cut its 2015 demand forecast to a more than decade low, and U.S. oil supply showed a surprise increase. Saudi Arabia also dismissed talk of production cuts.

The $60 level raises concern about the weakest oil companies in the shale industry, which are those with higher debt levels and that need higher prices than competitors to operate.

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