Dow Jones goes through its worst week since 2011

Indicators of a strengthening economy did nothing to shield stocks from oil's plummeting trend as the Dow Jones Industrial Average had its worst week since 2011. The volatility surged and fund managers said anxiety is building among clients and themselves.

More than $1.2 trillion was erased from global equities over the five days, as the drop in crude below $58 a barrel raised concern over the strength of the global economy. The Chicago Board Options Exchange Volatility Index, a measure of trader anxiety that has spent most of the year hovering about 25 per cent below its historical average, jumped 78 percent as oil's impact rippled through financial markets.

Marshall Front chief investment officer and chairman of Front Barnett Associates LLC, via phone said, 'This week was a bit of a game changer, with oil prices falling there has to be a lot of reassessing going on.' The Dow lost 677.96 points, or 3.8 percent, to 17,280.83. The Standard & Poor's 500 Index slid 3.5 percent to 2,002.33, its biggest drop since May 2012. The MSCI All-Country World Index declined 3.8 percent, also the most since 2012.

The worst rout in Greek equities since 1987 sent European shares to their biggest weekly drop in more than three years. Canadian stocks plunged 5.1 percent and Brazil entered a bear market, falling more than 20 per cent from a September peak. Money managers speaking after the December 12 close said the speed of oil's plunge was taking a psychological toll in a market where the S&P 500's 2014 return has slipped from more than 12 per cent on December 5 to about 8 per cent now.

Philip Orlando, who helps oversee $350 billion as New York-based chief equity market strategist at Federated Investors Inc., said he'd 're-run models' on Monday and see if a rebound materializes.

For two weeks, industries that might benefit from lower oil have been caught in the selloff. The Dow Jones Transportation Average dropped 3.4 percent during the week and is down 4 percent since November 25. The S&P 500 Retailing Index lost 0.6 percent, and 1.2 percent the week before.

Erik Davidson, who helps oversee $170 billion as deputy chief investment officer at Wells Fargo Private Bank, said via phone that, 'The dramatic change in oil price is a disruptive event and it causes people to rethink their views on the world, anyone that's had exposure to equities this year, they've done well, so there's certainly a lot of people that are now likely to be finding themselves a little overexposed here and will be trimming back and redeploying that cash.'

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