U.S. stocks slump as oil rout continues

NEW YORK - U.S. stocks dropped Friday as the rout in oil continued and a report indicated that growth in China, the world's second-largest economy, continues to slow.

The Standard & Poor's 500 index fell 33 points, or 1.6 percent, to 2,002. The Dow Jones industrial average dropped 316 points, or 1.8 percent, to 17,281. The Nasdaq composite fell 55 points, or 1.2 percent, to 4,653.

Falling oil prices weighed on the stock market again. Oil slumped after the International Energy Agency said global oil demand in 2015 will grow less than previously forecast.

U.S. benchmark oil slipped $2.21, or 3.7 percent, to $57.74 a barrel. Brent, the international benchmark, lost $1.98, or 3.1 percent, to $61.70.

While the plunge in oil is good for drivers because it lowers gas prices, the slump is hitting energy companies hard. If low prices persist, some U.S. oil producers could go out of business as the cost of extracting oil exceeds its market price. Falling earnings at oil companies will also crimp spending on plants and machinery in that industry.

The IEA also warned that oil-producing economies would be hit hard.

"The adverse impact of the oil price rout on oil-exporting economies looks likely to offset, if not exceed, the stimulus it could provide for oil-importing countries against a backdrop of weak economic growth and low inflation," the IEA said.

The strength of China's economy concerned investors after figures showed factory output growth declined to 7.2 percent in November from 7.7 percent growth in October. The data came after Chinese leaders at an annual planning meeting affirmed their commitment to the "new normal" of slower growth as they try to steer China toward a more sustainable expansion based on domestic consumption.

The slump in oil has unsettled the market, putting it on track for its first weekly drop in eight weeks.

"The move, especially this week, has been entirely related to oil" said James Liu, global market strategist for J.P. Morgan Funds. "In the fourth quarter you're going to see a lot of pain from the energy sector."

Britain's FTSE 100 sank 2.5 percent, while Germany's DAX fell 2.7 percent. France's CAC 40 declined 2.8 percent.

Software company Adobe bucked the downward trend. Its stock jumped $7.05, or 10 percent, to $76.83 after the company reported fourth-quarter results that beat Wall Street expectations on Thursday. Adobe also said it will pay $800 million to buy the stock image and video company Fotolia.

Government bond prices rose. The yield on the benchmark 10-year Treasury note, which falls when prices rise, dropped to 2.09 percent from 2.17 percent Thursday.

The dollar fell. The U.S. currency dropped to 0.3 percent to 118.57 yen. The euro rose 0.5 percent against the dollar to $1.2453.