Stocks slide as oil prices escalate sharply
NEW YORK – Wall Street turned lower Wednesday 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 gasoline demand. That could lead to higher prices at the pump, a troublesome trend given that retail gas 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 U.S. economy, is watched closely by the Federal Reserve. Earlier Wednesday, Fed Chairman Ben Bernanke said he expects the economy to contract in the first half – a trend that would mean the U.S. 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.
Some of the pullback late Wednesday also was pinned on profit taking after that big advance.
The Dow Jones industrials fell 48.53, or 0.38 percent, to 12,605.83 after changing direction several times.
Broader market indexes also fell. The Standard & Poor’s 500 index fell 2.65, or 0.19 percent, to 1,367.53 while the Nasdaq composite index fell 1.35, or 0.06 percent, to 2,361.40.
The 10-year Treasury note’s yield, which moves opposite its price, rose to 3.59 percent from late Tuesday’s 3.55 percent.
Investors paid close attention to what Bernanke had to say about a number of problems facing the economy – including tightening credit markets, a slumping housing market, and the near collapse of investment bank Bear Stearns Cos. Stocks initially rose after the Fed chairman said he doesn’t believe the nation’s big investment banks face the possibility of a collapse.
Richard Sparks, a senior equities analyst at Schaeffer’s Investment Research, called Wednesday’s market performance “a breather.” He said stocks might begin to percolate higher if first-quarter earnings come in better than expected, and should the credit markets remain stable.
The Russell 2000 index of smaller companies rose 1.62, or 0.23 percent, to 712.27.
Advancing issues barely outpaced decliners on the New York Stock Exchange, where consolidated volume came to 4.19 billion shares, compared with 4.65 billion on Tuesday.
Overseas, Tokyo’s Nikkei index closed up 4.21 percent. There were gains in European stocks too – London’s FTSE 100 rose 1.08 percent, Frankfurt’s DAX advanced 2.84 percent and Paris’ CAC 40 gained 0.94 percent.