Dow falls nearly 200 as oil hits $129

NEW YORK – Wall Street stumbled Tuesday after oil prices spiked to a new record more than $129 a barrel, and a government report raised investors’ concerns about the impact of inflation on consumer spending. The Dow Jones industrials fell nearly 200 points.

Crude jumped after OPEC’s president was quoted as saying his organization won’t raise its output before its next meeting in September. That sent a barrel of light, sweet crude to a trading high of $129.60 before it finished just above $129 a barrel on the New York Mercantile Exchange.

Meanwhile, the Labor Department’s producer price report indicated higher energy and food prices might be seeping into other parts of the economy – compounding investors’ concerns raised by higher oil. The department said wholesale inflation edged up by 0.2 percent in April following a 1.1 percent jump in March, but outside of food and energy, prices rose by a faster 0.4 percent – double what analysts expected.

Wall Street is worried that a drop-off in consumer spending could ensue if wholesale price increases are passed along; consumer spending is critical because it accounts for more than two-thirds of the U.S. economy.

Analyst Stephen Leeb believes escalating oil prices and their fallout have now replaced the health of the financial sector as the market’s biggest worry. He said rising energy creates a “very vicious circle” through the economy, and he thinks the government must take some kind of action to bring down prices.

The retreat in major indexes reversed the optimism of last week, when stocks rose on a growing belief that the economy is still managing to plod along despite worries about both oil prices and the global credit crisis. The loss showed that the market has yet to shake off the volatility that has plagued it since the credit crisis began last summer.

The Dow fell 199.48, or 1.53 percent, to 12,828.68, logging its biggest daily slide since a 206-point drop on May 7.

Broader market indexes also retreated. The Standard & Poor’s 500 index shed 13.23, or 0.93 percent, to 1,413.40, and the Nasdaq composite index dropped 23.83, or 0.95 percent, to 2,492.26.

Overseas, Japan’s central bank kept interest rates steady amid lingering worries about a global slowdown. Tokyo’s Nikkei closed down 0.77 percent. In Europe, London’s FTSE dropped 2.90 percent, Frankfurt’s DAX fell 1.49 percent and Paris’ CAC 40 shed 1.70 percent.