August 7, 2004 in Business

Oil costs, jobs report sink stocks

Michael J. Martinez Associated Press
 
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NEW YORK – If you were to superimpose a chart showing the Dow Jones industrial average for the past few weeks with a chart showing oil prices, you’d see a distressing mirror image – when oil went up, stocks went down.

For the past week, investors wondered what would break stocks out of the cycle. On Friday, they got their answer. The problem is that the economy added only 32,000 jobs in July, far fewer than economists expected. That broke the cycle by sending stocks even lower.

Now investors are faced with a confluence of bad news that will likely send prices down further. Crude oil futures continued to hover around $44 per barrel. And the economy’s “soft spot” in June, as described by Federal Reserve Chairman Alan Greenspan, could turn out to be a disturbing trend.

So while fewer jobs are being created – and, most likely, consumer spending will be constrained by the scarcity of new work – consumers will pay more not only at the pump, but also for many other goods that must be shipped to stores, since companies will likely attempt to pass on increased fuel costs.

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