NEW YORK (TheStreet) -- Crude oil prices dropped another 2.9%, closing below $60 per barrel. The drop weighed on equity prices, with the S&P 500 rallying 0.45% but closing well off its highs from earlier in Thursday's session.
Perhaps investors are interpreting lower oil prices as lower demand, meaning the economy is weaker than previously thought, Karen Finerman, president of Metropolitan Capital Advisors, said on CNBC's "Fast Money" TV show. If oil prices stabilize, then perhaps investors will feel more confident.
The stock market's rally was "feeble," said Guy Adami, managing director of stockmonster.com. While oversupply is certainly not helping matters, a lack of demand is certainly weighing on oil prices. He continued to stress that bond yields are headed lower.
The next big support level for crude oil may not come until $42 to $45 per barrel, according to Steve Grasso, director of institutional sales at Stuart Frankel. However, buyers will likely come in throughout the $50 range.
Maybe oil is the asset that was overly inflated from the Federal Reserve's multi-year stimulus programs, said Dan Nathan, co-founder and editor of riskreversal.com. The iShares High Yield Corporate Bond ETF (HYG) continues to make 52-week lows, he added. Investors continue to buy put options in fear of systemic risk related to the junk credit U.S. energy companies.
Investors looking for a trade in oil can attempt to buy Seadrill (SDRL) if and when Transocean (RIG) cuts its dividend, Adami said. Finerman added that she is long call options in Seadrill looking for a bounce. The beauty of call options is that the risk is limited, Finerman said.
Oil could decline to $45 per barrel, but that's unlikely to be sustained, according to Tom Kloza, co-founder of Oil Price Information Service. It's unlikely that oil has found a bottom and will likely continue lower. The refining companies will ultimately benefit in the longer term, but tend to underperform in December and January. Gasoline retailers continue be a huge beneficiary of lower prices at the pump, as consumers have more disposable income, he concluded.