NEW YORK — The U.S. economy ended last year on a tear, but markets are saying the outlook for this year is less bright.
Stocks continued to retreat from their recent record highs Tuesday, weighed down by an ongoing plunge in the price of oil. Bonds rallied as investors bought the safest assets, pushing the yield on the benchmark 10-year Treasury note back below 2 percent for the first time in three months.
The moves suggest that investors have little confidence the U.S. economy will continue to grow at the 5 percent annual pace reached in the final quarter of last year. The reason for the gloomy prognosis is a slowdown in growth elsewhere in world, particularly Europe.
The slump in the price of oil, which dropped well below $50 a barrel Tuesday from $107 in June, also has prompted a sharp shift in investor sentiment.
“Oil prices falling is a good thing for the economy overall,” said Randy Frederick, managing director of trading and derivatives with the Schwab Center for Financial Research. “But there is a point when they fall far enough that it could potentially be a problem.”
The Standard & Poor’s 500 index dropped 17.97 points, or 0.9 percent, to 2,002.61. The Dow Jones industrial average closed down 130.01 points, or 0.7 percent, at 17,371.64. The Nasdaq composite dropped 59.84 points, or 1.3 percent, to 4,592.74.
While drivers filling up at gas stations are welcoming lower oil prices, investors are getting worried about the consequences of the slump, which has pushed the price of oil down by more than half in six months. On Tuesday, the price of oil fell $2.11 to $47.93.
