Wall Street retreats on oil price

Associated Press

May 07, 2008 03:44 pm

— Wall Street retreated Wednesday as the price of a barrel of oil surged past $123 for the first time and touched off concerns that recent gains in stocks might have been premature while consumers grapple with rising energy and food costs. The Dow Jones industrial average lost more than 200 points.

Sharp gains in commodity prices have drawn fresh attention from investors worried that consumers — the lifeblood of the U.S. economy — will be forced to pare spending to keep up with increasing costs for necessities.

Oil prices have doubled over the past year, causing gasoline prices to surge further into record terrain and strap debt-laden consumers 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 cited inflation as his main worry. Treasury Secretary Henry Paulson said in an interview with The Associated Press 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 is 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.

"Perhaps we fall away here for a few sessions," he said the S&P 500's rebound to the 1,400 level might have been too hasty for some investors.

The Dow fell 215.35, or 1.65 percent, to 12,805.48, after fluctuating in earlier trading.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 26.57, or 1.87 percent, to 1,391.69, and the Nasdaq composite index fell 47.23, or 1.90 percent, to 2,436.08.