Oil Prices Continue to Fall As Stocks Strengthen on Jobs Outlook

NEW YORK (TheStreet) -- Crude oil prices suffered punishing losses on Friday as crude dropped to levels nearly 40% lower than over the summer, briefly cratering to a five-year low. Leading economists were left to question just where rock bottom might be for commodities.

"We're going to see this trend probably for the next couple of weeks," said U.S. Bank investment strategist Rob Haworth over the phone, arguing a need for either an uptick in demand or constrained supply. "The biggest declines are likely behind us so we're probably talking about more modest levels of decline [such as] another 10%, 12% or 15% unless something significant changes with supply or demand."

Crude slid 1.7% on Friday to below $66 a barrel after a surprise surge in jobs growth fueled a rally in the U.S. dollar. ""With a stronger dollar, that has been bearish for commodities because oil is denominated in dollars," explained Schaeffer's Investment Research's Todd Salamone. "That makes it more expensive for foreigners to buy."

There certainly have been winners and losers -- such as airlines and oil companies -- as oil prices have declined. Exxon Mobil  (XOM) fell 0.58%, Chevron  (CVX) tumbled 1.3%, Phillips 66 (PSX) dumped 2.6% and BP (BP) slipped 1%. The Energy Select Sector ETF  (XLE) slid 1.2%.

Airlines added to big gains achieved over the week with JetBlue (JBLU) up 0.66%, American Airlines (AAL) climbed 2.7%, Delta Air Lines (DAL) gaining 1.9% and United Continental  (UAL) adding 2.1%.

Better-than-expected jobs data was able to cushion the broader market against the blows of sliding oil, though fears lingered that a robust economic recovery could push the Federal Reserve to raise rates sooner. The S&P 500 gained 0.17% and the Nasdaq added 0.24%. The Dow Jones Industrial Average rose to fresh intraday records and flirted with the 18,000-level before settling 0.33% higher.

"Everybody takes [the news] as a negative as much as a positive," said Brian Needleman, founder of Cornerstone Financial Partners, a firm which manages $950 million in assets. "People think it's great because it adds confidence to the market but the market itself basically sees it as a signal to the Fed to act and become more conservative in their forecasts as far as raising rates."

The November jobs number came in at a three-year high with 321,000 jobs added to payrolls, the Labor Department said Friday. That far exceeded estimates of a gain of 230,000 jobs and came in higher than October's 214,000 total. The unemployment rate remained at 5.8%, as expected.

But the Fed likely won't be persuaded from just one robust report. "The Fed is not going to raise rates unless they see wages continuing to rise," said Prudential Financial market strategist Quincy Krosby in a call. "It's not going to be one report. They're going to want to see a series of it to make certain it's a trend, not a one-off."

-- Written by Keris Alison Lahiff in New York.

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