Monster sell-off in risk assets - WSJ

The heavy losses in oil were accompanied by drops in equities and other commodity markets in a widespread exit of investors from risky assets on concerns about the economy.

"Today is an across the board movement away from risk and a flight to quality," said Brad Samples, analyst with Summit Energy in Louisville, Ky. The fall is "not just specific to oil."

The catalyst for the initial leg down was an unexpected rise in the number of U.S. workers filing new claims for jobless benefits last week. The Labor Department reported a rise in claims of 8,000 to 480,000 for the week ended Jan. 30.

"The initial jobs claims spooked the markets in anticipation of tomorrow (Friday's) jobs figure," said Samples.

The more widely anticipated U.S. non-farm payrolls for January will be released Friday morning. Investors will be closely watching for any changes in the jobless rate, with economists forecasting it at 10.1%.

Meanwhile, worries over the level of debt in European countries rallied the dollar to an eight-month high against the euro, contributing to a sharp decline in oil prices. Dollar-denominated oil tends to fall on a stronger greenback as it makes the commodity more expensive to other currency holders.

Fears mounted that Greece, Portugal and Spain may find it hard to bring their budgets under control--jeopardizing a fragile euro-zone economic recovery--and that this could potentially spread to other deficit-heavy economies.

Noting the longer-term run-up in the oil market since March 2009, Samples said oil prices have "over-anticipated economic recovery to some degree". He added "economic data is getting better but the pace of improvement is not very reassuring".

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