Oil price fears send shivers down Wall Street
Wall Street struggled today as investors worried that a sharp jump in oil prices could be another sign that consumers are under stress in an economy that is already showing signs of a recession.
The major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Department’s report of an unexpected jump in petrol demand.
Surging demand is likely to send prices at the pump higher, a troublesome trend given that retail fuel prices are expected to rise further as the summer approaches and put more financial pressure on consumers.
Consumer spending, which makes up about two-thirds of the US economy, is watched closely by the Federal Reserve to determine which direction the nation is heading.
Earlier today, Fed Chairman Ben Bernanke said he expects the economy to contract in the first half – a trend that would mean the US is in a recession.
Crude oil rose 3.85 to settle at 104.83 a barrel on the New York Mercantile Exchange.
“The oil uptick took away some of the optimism that we’ve seen recently,” said Richard Cripps, chief market strategist for Stifel Nicolaus. “Higher gasoline price would mean less in the pocket for Americans, and there’s also continued worries about a recession.”
The credit crisis and weak economy have sent stocks tumbling over the past six months. But the market had shown some renewed confidence that the worst of the credit problems might be behind Wall Street; that upbeat sentiment sent stocks up nearly 400 points yesterday, the first day of the second quarter.
Some of the pullback late today also was pinned on profit taking after that big advance.
According to preliminary calculations, the Dow Jones industrials fell 45.44, or 0.36%, to 12,608.92 after changing direction several times.
Broader market indexes also fell. The Standard & Poor’s 500 index fell 2.65, or 0.19%, to 1,367.53 while the Nasdaq composite index fell 1.35, or 0.06%, to 2,361.40.
