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Historic week: Dow plunges 1,079 points

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Crude oil may be ruining that much-needed rebound on Wall Street.

It took just two hours for U.S. stocks to surrender their early gains on Friday. The markets returned to negative territory as crude oil took another leg down.

After starting the day with a 138-point bounce, the Dow is now down 66 points. The S&P 500 and Nasdaq are down about 0.5% apiece.

The early enthusiasm came after China’s stock market stopped crashing and a strong U.S. jobs report.

U.S. stocks are struggling to rebound from their worst four-day start to a year on record for the Dow, which was down more than 5% through Thursday’s close. It was also the bleakest start to a year for the Nasdaq since 2000.

“Our inaugural 2016 selloff may have climaxed yesterday,” Peter Kenny, independent market strategist and founder of Kenny’s Commentary, wrote in a note. “Given the extreme risk-off nature of our first four days of trading this year, bargain hunters may be enticed to step into the market.”

But investors are once again being spooked by crude oil prices, which plunged to the lowest level since late 2013 on Thursday. Oil initially calmed down on Friday but is back in the red again. Crude was recently down 1.5% to $32.75 a barrel.

When oil drops, so do energy stocks. They were the biggest losers on Friday, with names like Chesapeake Energy(CHK) and Southwestern Energy(SWN) sinking more than 2% each.

Global stocks continue to take their cues from China, which managed to pull back from the brink. The benchmark Shanghai Composite closed 2% higher on Friday.

Related: What’s driving the global market freakout…in 2 minutes

That’s a relief because Chinese stocks started the year with an epic 12% nosedive. The selling earlier in the week triggered “circuit breakers” that are designed to smooth volatility in the markets. Trading in China was halted twice this week — on Thursday, the stock markets shut down after just a half hour of trading.

Sentiment was boosted after regulators scrapped the circuit breakers because many believe they were fueling sharp trading losses — rather than taming them.

Investors also cheered as China stopped allowing its currency to lose value. In fact, China’s central bank raised its target rate for the yuan for the first time in over a week. The surprise decline in the yuan has raised fears of a currency war of competitive devaluations.

Wall Street initially responded favorably to the latest evidence that the U.S. economy continues to chug along despite the global turmoil. The government said the U.S. added 292,000 jobs in December, easily beating expectations. It capped off the second-strongest year of employment gains since 1999. Importantly, wages went up 2.5% last month, matching the best gain in six years.

CNNMoney (New York) First published January 8, 2016: 10:03 AM ET

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