Wall Street debates implications of crude's drop

What had looked like a good thing for consumers and their disposable income with the falling price of oil has shifted to hand-wringing amid stories of what crude's drop means for the global economy and capital spending.

The truth likely lies somewhere in the middle, said Bruce McCain, chief investment strategist at Key Private Bank.

"Net oil consumers such as Europe and Japan should be better off, net producers like Canada will be worse off," McCain said.

On Tuesday, the International Monetary Fund weighed in, repeating its expectation that the steep fall in crude will increase global output in 2015 between 0.3 percent to 0.7 percent, while bringing a "new risk dimension" to the world.

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The IMF projected the global economy will grow 3.5 percent this year, down from the 3.8 percent gain estimated in October.

"The forecast for the global economy is coming down, largely because they recognize as investors do today that the decline in the price of oil, whether we're talking about day or the last month, carries with it negative implications for the global economy," said Hugh Johnson, chairman of Hugh Johnson Advisors.

"Although the decline in the price of oil is likely to be good news for importing economies, it is not particularly good news for the global economy," said Hugh Johnson, chairman of Hugh Johnson Advisors.

"Most of what I've seen suggests decent numbers out of most companies, but energy is such a pothole it may be hard for investors to look past that entirely," said McCain.

The price of crude does overstate the "slowdown in consumption or demand and the increase in U.S. production that we've seen. We've reached an emotional extreme driven by speculation in the crude-oil markets. Lower prices are justified, but not at this low a price," Johnson said in forecasting a substantial recovery in the energy market.

"The battle is going to be how much do consumers increase spending because of the cost reduction of their fuel consumption, whether auto or home heating, versus the industrial energy sector weakness," Paul Karos, senior portfolio manager at Whitebox Advisors, said.

"It's a battle that we have to watch very closely," Karos added.

"The more appropriate question for investors is not will it drive or derail growth, but who will be the winners and who will be the losers," McCain said.