U.S. Stocks Sink as Oil Rout Deepens With Emerging-Asset Selloff

Investors who piled into the riskiest corners of the credit markets during seven years of rock-bottom interest rates are getting a reminder of how hard it can be to cash out. With outflows from U.S. high-yield bond funds running at the fastest pace in more than a year, Martin Whitman's Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund on Dec. 9.

The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, rose 5.52 basis points to 502.88 basis points, approaching the highest level this year. BlackRock's iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, fell to the lowest levels since 2009.

U.S. 10-year yields fell six basis points to 2.17% on Friday, compared with 2.17% on Dec. 31, 2014. The yield on similar-maturity German bunds was at 0.56%.

From the U.S. to Greece to Japan, all major developed government bond markets are poised to finish 2015 with a gain even as the Fed prepares to raise interest rates.

All 26 markets tracked by Bloomberg are poised to generate positive returns this year. Greek bonds led the gains with an 18% rally after the nation received an international bailout. Treasuries advanced 1%. Government securities also rose in Japan, Germany and Switzerland, pushing yields on some maturities in those nations below zero. Emerging Markets

The MSCI Emerging Markets Index dropped 1.8%, heading for the lowest close since September. The gauge dropped 4.4% in the week, the biggest decline for the period in 2 1/2 months. Equity benchmarks in Hong Kong, Indonesia and South Africa lost at least 1.5% on Friday.

The Hang Seng China Enterprises Index sank 1.5%, its seventh day of losses and the Shanghai Composite Index slid 0.6% to a five-week low. More than 30 senior executives of listed Chinese companies have gone missing or faced government probes this year, according to the state-run Securities Times.

The yuan fell 0.27% in Shanghai, taking its five-day loss to 0.83%, on speculation China's central bank is taking advantage of a stronger dollar to weaken the currency before the U.S. raises rates.

Commodities

Oil headed for the biggest weekly decline since March amid speculation OPEC's decision to effectively scrap production targets will keep the market oversupplied. The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows "renewed determination" to maximize output, the International Energy Agency said in a report released Friday. West Texas Intermediate crude dropped 0.9% to $36.43 a barrel.

Most industrial metals gained, with copper rallying the most two weeks, amid speculation that China's state stockpiling agency planned to buy material, which would help soak up surplus supplies. Aluminum climbed for a third day after China's smelters agreed not to expand capacity. 

Copper had the most negative outlook in a Bloomberg commodities outlook survey, with 18 respondents saying they were bearish for 2016, while eight were bullish and four were neutral.

Iron ore fell 0.6% to $38.30 a ton, according to a price index compiled by Metal Bulletin.

–With assistance from Neil Denslow, Emma O'Brien, Lukanyo Mnyanda, Anna-Louise Jackson and Sridhar Natarajan.

— Check out Grantham: 12 Economic Facts to Ruin Investors' 2016 on ThinkAdvisor.