Wall Street retreats as oil prices creep higher
Light, sweet crude for June delivery hit a new trading record of $123.93 in after-hours activity on the New York Mercantile Exchange after settling up $1.69 at a record close of $123.53 a barrel. At the pump, gas prices rose for the first time since last week. Analysts attributed oil's rise to continued buying from the surge that pushed prices past $120 for the first time earlier this week.
At the pump, the average national price of a gallon of regular gas rose Wednesday for the first time since last week, adding 0.8 cent to $3.618, according to a survey of stations by AAA and the Oil Price Information Service. Gas prices are back within a cent of the record $3.623 a gallon set last week and are expected to rise to an average of $3.73 a gallon next month, according to the latest Energy Department forecast.
The major stock market indexes each lost more than 1.5 percent on Wednesday, with the Dow Jones industrial average declining by more than 200 points.
Oil prices have doubled over the past year, causing gasoline prices to surge further into record terrain and strap consumers, who drive more than two-thirds of economic activity, with another financial burden.
Wall Street slid amid a cacophony of worries about the effects of rising prices. Kansas City Federal Reserve President Thomas Hoenig in a speech late Tuesday pointed to inflation as his main concern. Treasury Secretary Henry Paulson said in an interview Wednesday with The Associated Press 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 observers say recent stock-market gains had come too quickly anyway, others contend 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 price 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.
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