The oil market is notoriously volatile and the United States is heavily dependent on it, both in terms of consumption and export. This is particularly true in Texas, the largest state. However, there are contingency plans in place to cope with the falling price of oil and therefore any detrimental effects on the stock market are unlikely to be long term.
I've heard good and bad. I would have to wait and see how it plays out as I am not studied up on the complete picture. The lower fuel prices will be bad for the environment with people driving more. There will be a great deal of job loss in the states like ND and TX where oil work is booming and in the industries that manufacture the tools and equipment needed to sustain the oil industry, but there will be a greater increase in other job areas where consumers spend their estimated 100 billion plus extra funds. The stock market is going to take a major hit because of all the junk bonds tied to the oil industry but their will be excess funds left with consumers to invest in other markets. Food costs should come down with the lower fuel costs to farming and freight industries. However the biggest hit might come from the the diminished demand from our nations top import trade partners that rely heavily on the oil market. These countries are coming into a major recession period that will diminish their demand for American goods, which may be our biggest issue with the downturn of oil prices. Right now there are so many aspects of the economy that will be affected by this, I think I will have to wait and see how it all plays out.
While drops in oil prices cause immediate drops in energy stocks causing the overall market to fall, lower oil prices results in increased consumer spending. If oil continues to fall it should lead to mergers in the energy market which boosts stock prices. Over all the Dow, S&P 500 and Nasdaq are still up.
With manufacturing and food production so geographically scattered as they are, the price of fuel naturally is a major factor in the price of just about any consumer product you can think of. Hence, the falling price of oil should be a boon to the consumer economy all around: prices of all manner of products should drop as well.
Many reports are saying that gas prices falling are equal to an economy falling apart. But, many Americans say the great gas prices can only do good for the economy. I must say, I agree with the American people. But, only time will tell on how the prices will actually effect or help the stock market.