Wednesday, May 21, 2008
NEW YORK (AP) — Wall Street stumbled Tuesday after oil prices spiked to a new record above $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 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 thinks the government must take some kind of action to bring down prices.