Investing.com - Falling oil prices slammed U.S. stocks on Friday by stoking concerns that assets in general may be overvalued in wake of years of ultra-loose monetary policy, with disappointing U.S. and Chinese data adding to the day's selloff.
At the close of U.S. trading, the Dow Jones Industrial Average index fell 1.79%, the S&P 500 index fell 1.62%, while the Nasdaq Composite index fell 1.16%.
The S&P 500 VIX index, which measures the outlook for market volatility, was up 4.98% at 21.08.
Oil prices have fallen in recent months on concerns that supply far outstrips demand, and a recent OPEC decision to leave output unchanged has exacerbated losses.
Don't expect the supply glut to abate anytime soon, the International Energy Agency said in its December report released earlier Friday, as more oil is still in the global pipeline.
"Barring a disorderly production response, it may well take some time for supply and demand to respond to the price rout," the IEA said in its report.
"When it comes to supply, lower oil prices are already slashing producers' spending, but this is more likely to affect medium- and long-term output than short-term supplies. So long is the lead of oil projects that price swings can take time to work their way through to supply. Projects that have already been funded will for the most part go on."
The IEA also said it had cut its 2015 global oil demand growth forecast by 230,000 barrels per day to 0.9 million bpd, which hammered stocks by stoking concerns headwinds may be cooling the global economy at a time when many assets may be overvalued due to years of low interest rates and loose monetary policies.
Meanwhile in the U.S., mixed data sent investors heading for the exit door.
The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to a nearly eight-year high of 93.8 this month from 88.8 in November. Analysts had expected the index to rise to 89.7 in December.
However, the U.S. Department of Labor reported that the U.S. producer price index fell 0.2% last month, surpassing expectations for a 0.1% downtick, after rising 0.2% in October.
Core producer price inflation, which excludes food, energy and trade, was flat in November, confounding expectations for a 0.1% rise, after an increase of 0.4% the previous month.
Elsewhere, China reported that its industrial production rose 7.2% in November, missing expectations for an increase of 7.5%, after a 7.7% gain in October, which added to Friday's losses.
Leading Dow Jones Industrial Average performers included Wal-Mart Stores Inc (NYSE:WMT), down 0.02%, Walt Disney Company (NYSE:DIS), which was down 0.28%, and Microsoft Corporation (NASDAQ:MSFT), down 0.32%.
The Dow Jones Industrial Average's worst performers included International Business Machines (NYSE:IBM), down 3.53%, DuPont (NYSE:DD), down 3.18%, and Exxon Mobil Corporation (NYSE:XOM), down 2.91%.
European indices, meanwhile, ended the day lower.
After the close of European trade, the Euro Stoxx 50 fell 2.91%, France's CAC 40 fell 2.77%, while Germany's DAX 30 fell 2.72%. Meanwhile, in the U.K. the FTSE 100 fell 2.49%.
On Friday, the U.S. is to round up the week with data on producer prices and a preliminary report on consumer sentiment.