US open: Stocks in the red as oil hits fresh lows

US equity markets fell sharply on Wednesday, with energy shares suffering the brunt of the losses as crude oil slid to fresh lows.

At 1540 GMT, the Dow Jones Industrial Average was down 2.4%, the S&P 500 was 2.6% weaker and the Nasdaq was down 2.8%.

Energy stocks were the standout losers, with Chesapeake Energy down 8%, Chevron off 5.3% and Exxon Mobil down 2.7% as oil prices came under pressure again, hitting fresh 12-year lows.

West Texas Intermediate was down 3.9% at $27.35 and Brent crude was 3.2% lower at $27.85.

On Wednesday, the International Energy Agency warned that oil markets could “drown in oversupply”, adding that Iran’s return to the market is unlikely to be balanced out by production cuts from other countries.

The IAE reckons oil markets will still have a surplus of 1.5m barrels a day in the first half of this year.

“This is worrying times for investors as the market is showing signs of pure panic and is being dominated by fear as each day brings its new set of challenges,” said James Hughes, chief market analyst at GKFX.

“The longer fear is dominating the longer we are likely to be on the back of these big swings with safe havens dominating any kind of upside moves, but with poor macro data from China and a fear of lower global GDP then any chance of sustainable upside, without hugely positive macro data from the US or Eurozone it seems that currently any upside will be short lived.”

CPI, housing starts in focus

Meanwhile, investors digested some mixed data.

Figures from the Commerce Department showed US housing starts fell 2.5% in December from the previous month to a seasonally-adjusted annual rate of 1.15m, undershooting expectations for a rise to 1.2m.

Starts for single-family homes fell 3.3% from the revised November figure of 794,000 to an annual rate of 768,000.

Permits for new construction, which are a closely-followed gauge of future demand, fell 3.9% from the revised November rate of 1.28m to a seasonally-adjusted annual rate of 1.23m. Still, the drop was less steep than expected, as economists had pencilled a reading of 1.2m.

Elsewhere, figures from the Bureau of Labor Statistics revealed the US consumer price index rose 0.7% in the year to December.

Although this was an improvement on the previous month's 0.5% year-on-year growth, it was below analysts' expectations of 0.8% and a long way off the Federal Reserve's 2% target.

Excluding energy and food, CPI increased 2.1% in December, as expected, compared to 2% in November.

Goldman Sachs, IBM disappoint

In corporate news, Goldman Sachs edged lower after its fourth quarter earnings fell short of expectations as the bank had to set aside money to pay a regulatory settlement for mortgage-backed securities it sold in the run-up to the financial crisis.

IBM shares tumbled following an unexpectedly downbeat forecast for 2016 released late on Tuesday.

In currencies, the dollar was down 0.3% against the pound, 0.1% weaker against the euro and 1.1% lower versus the yen.