U.S. stocks declined on Friday, with benchmark indexes posting sizable weekly losses, as crude's ongoing slide rattled investors.
"This started a week or so ago, we'd recovered from the October low to a level that is arguably overvalued, and when we're overvalued everything has to go right, and what's not going right is what's happening to the price of oil, and what that means for Russia, Europe and the U.S.," said Hugh Johnson, chairman of Hugh Johnson Advisors.
"Everybody likes to say the price decline in oil is good news for the U.S. economy, but the real issue is this is really bad news for Russia, and by implication, bad news for Europe, which does a lot of business with Russia. The problems in Russia are getting transmitted to Europe, and Europe is an important trading partner for the U.S.," said Johnson.
"Whether it's by design or not, this is clearly putting pressure on Russia. This, plus the well-known sanctions have caused a recession in Russia, which is very dependent on oil" income," he said.
The Chicago Board Options Exchange Volatility Index, one measure of investor uncertainty, rose 5 percent to 21.08, up 78 percent this week.
Oil prices fell further after the International Energy Agency reduced its outlook for global demand.
"As prices have declined over the last month or two, we've also seen downward revisions that reinforce the price decline," said Kate Warne, investment strategist at Edward Jones.
Equities around the globe dropped on Friday after November Chinese factory production slowed more than forecast.
U.S. wholesale prices declined 0.2 percent drop in the producer price index in November after a 0.2 percent rise the previous month.
The drop in commodity prices could be seen in Friday's PPI, "it's showing up in lower inflation, and in the case of Europe, which is just a whisker away from deflation, that's not good news, because fiscal policy in Europe is leaning towards restraint. They believe in balanced budgets regardless. I don't, but they do. If they suffer deflation, that will disarm European central bank interest rate policy," said Johnson.
Adobe Systems gained after the software maker said it would acquire stock-photo company Fotalia for $800 million and posted quarterly results that beat expectations.
Stocks only briefly trimmed losses after a measure of consumer sentiment in December exceeded expectations, rising to an eight-year high.
American consumers "are feeling better, and lower gasoline prices will continue to help sentiment, which should be good news for stocks overall, but today it's all about worries that lower demand for oil means slower growth in the rest of the world, and nobody is sure how big that slowdown will be," said Warne.