MARKET REPORT : Wall Street slips, falls on gushing oil
Posted on Thursday, May 8, 2008
NEW YORK — Wall Street tumbled Wednesday as the price of a barrel of oil soared to a record near $ 124 and touched off concerns that the stock market’s recent gains might have been premature while consumers grapple with rising energy and food costs.
The Dow fell 206. 48, or 1. 59 percent, to 12, 814. 35, after fluctuating early in the session.
Sharp gains in commodity prices have drawn fresh attention from investors worrying that consumers, the lifeblood of the U. S. economy, will have to pare discretionary spending to keep up with increasing costs for necessities.
As oil prices have doubled over the past year, gasoline prices have surged further into record terrain and strapped consumers, who drive more than two-thirds of economic activity, with yet another financial burden.
Wall Street slid Wednesday amid a cacophony of worries about the effects of rising prices. Kansas City Federal Reserve President Thomas Hoenig in a speech late Tuesday pointed to inflation as his main concern. Treasury Secretary Henry Paulson said in an interview with The Associated Press on Wednesday that while the worst of the credit crisis might have passed, rising gas prices will dampen the benefits from the 130 million economic stimulus checks that the government is distributing.
While some investors say recent stock market gains had come too quickly anyway, others say the market’s declines reflect more serious worries about the difficulties blanketing consumers.
Ed Peters, chief investment officer at PanAgora Asset Management in Boston, said, “It is going to be a drag if we continue to get rising prices. The oil prices [are ] just symptomatic of a broader trend.” But Stephen Carl, head of equity trading at The Williams Capital Group, said that while rising oil prices appeared to rattle investors, many had also seen sizable gains from stocks in recent weeks and wanted to preserve their profits.
He said the S&P 500 ’s rebound to the 1, 400 level might have been too hasty for some investors.
Broader stock indicators also declined Wednesday. The Standard & Poor’s 500 index fell 25. 69, or 1. 81 percent, to 1, 392. 57, and the Nasdaq composite index fell 44. 82, or 1. 80 percent, to 2, 438. 49.
The Russell 2000 index fell 13. 58, or 1. 86 percent, to 716. 21.
Declining issues outnumbered advancers more than 2-1 on the New York Stock Exchange, where volume came to 3. 94 billion shares.
Bond prices rose as investors pulled more money out of stocks and placed it in the safer confines of the Treasury market. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3. 85 percent from 3. 92 percent late Tuesday.
Light, sweet crude rose $ 1. 69 to settle at $ 123. 53 on the New York Mercantile Exchange.
The dollar rebounded against other major global currencies, and gold prices fell.
Overseas, Japan’s stock market rose 0. 38 percent. Britain’s FTSE index closed up 0. 74 percent, Germany’s DAX index rose 0. 84 percent, and France’s CAC-40 rose 0. 68 percent.
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