Dow Tumbles 200 Points As Oil Prices Soar

Paulson Says Credit Crisis May Be Fading But High Gas Prices May Blunt Effect Of Stimulus Checks

(AP)  Wall Street tumbled Wednesday as the price of a barrel of oil soared to a record near $124 and touched off concerns that the stock market's recent gains might have been premature while consumers grapple with rising energy and food costs. The major stock market indexes each lost more than 1.5 percent, with the Dow Jones industrial average declining by more than 200 points.

Sharp gains in commodities prices have drawn fresh attention from investors worried that consumers — the lifeblood of the U.S. economy — will be forced to pare discretionary 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 consumers, who drive more than two-thirds of economic activity, 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 pointed to inflation as his main concern. 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.

According to preliminary calculations, the Dow fell 206.48, or 1.59 percent, to 12,814.35, after fluctuating early in the session.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 25.69, or 1.81 percent, to 1,392.57, and the Nasdaq composite index fell 44.82, or 1.80 percent, to 2,438.49.

Bond prices rose as investors pulled more money out of stocks and placed it in the safer confines of the Treasury market. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.85 percent from 3.92 percent late Tuesday.

Light, sweet crude rose $1.69 to settle at $123.53 on the New York Mercantile Exchange.

The dollar rebounded against other major global currencies, and gold prices fell.

While stocks pulled back, the day was not without good news. The Labor Department said labor costs rose at an annual rate of 2.2 percent during the first quarter. That's down from a 2.8 percent rise the previous quarter, suggesting that inflation pressures may be letting up.

But there have not been enough strong readings lately to give investors the nudge they need to push the Dow back above the four-month highs it reached last week. Market analyst Edward Yardeni noted that the Dow, the S&P 500 index and many key individual stocks are close to their 200-day moving averages.

"Not everybody's a fan of technical analysis, but everyone knows that this is an important technical level," Yardeni said. "We need some really good bullish news to break above that average."

In corporate news, Clearwire and Sprint Nextel Corp. said they are planning to merge their wireless broadband units to create a new $14.55 billion wireless communications company. The new company is getting a $3.2 billion investment from Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks.

Clearwire fell 24 cents to $16.22 after spending most of the session higher and Sprint slipped 3 cents to $9.16.

In earnings news, The Walt Disney Co. reported late Tuesday its profit in the most recent quarter rose 22 percent despite the Hollywood writers' strike. Disney was among the handful of the 30 stocks that comprise the Dow industrials to advance, rising 97 cents, or 2.9 percent, to $34.70.

Yardeni noted that while the first-quarter earnings season began several weeks ago with worse-than-expected results from General Electric Co., it ended up bringing decent results, with earnings excluding the financial sector rising close to 10 percent.

"There is a perception in the markets we had a great move here since March, and that we need to take a break from the rally for a while," Yardeni said. "And then we'll be set up for a summer rally."

The Russell 2000 index fell 13.58, or 1.86 percent, to 716.21.

Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.28 billion shares compared with 1.23 billion shares traded Thursday.

Overseas, Japan's stock market rose 0.38 percent. Britain's FTSE index closed up 0.74 percent, Germany's DAX index rose 0.84 percent, and France's CAC-40 rose 0.68 percent.

[nonayabiness]

I hope the Dow gets down to about 2k. Maybe 5k. That would be great.

[tazmjam]

http://infowars.net/articles/may2008/050508oil.htm

Ref: article written by F. William Engdah
A June 2006 US Senate Permanent Subcommittee on Investigations report on %u201CThe Role of Market Speculation in rising oil and gas prices,%u201D noted, %u201C . . . there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.%u201D
What the Senate committee staff documented in the report was a gaping loophole in US government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months.
The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC.
In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight.

[gce65]

speculators, investment bankers and financial services institutions are throwing around the $150-$200 per barrel figure so they can create panic in the market and a self fulfilling prophecy. what do you think they''re investing in now that the housing bubble has burst? OIL companies, OIL futures, OIL services corps.

[lochlan-2009]

"Oil prices have doubled over the past year"

See people, the demand for oil has doubled over the last year. Hence, the high prices.

If you can''t see how much control the government/corporate oligarchy have over our markets, there is no hope for you, just keep drinking the cool-aid.

[noloyalisti]

Now we know what stay the course was about. Invading an unarmed country for Exxon and Chevron to control the oil. Stay there until the mission of the neo con men was done. Cause chaos and raise the price of oil for the fascist corporations.

Way to go, and I hope the price goes up to $8. After all, we voted in the oil aristocracy.

[blackwater66-2009]

They will not rest until we are paying the same $8.00 or $9.00 a gallon as they are in Europe! We were told several years ago the increase was because of refineries being down etc, than it was supply and demand and than trouble in the middle east, than Iraq oil would lower the price once it began to flow and now it is what the future will cost us and not the other stuff we were told. The real story is we got screwed good !!!
Stay the course !!!

[Gary Kempf]

Democrats: Close speculation loophole
Senate Democrats look to end U.S. electronic oil trading in foreign exchanges to reduce the speculative inflation of oil prices.

Thank god, Somebody is finally trying to end this cr*p!

[ov442]

Petro49L - the middle east is not low on oil. what are you smokin?
Saudi Arabia still has the worlds highest proven easily recovered oil reserves.Period.Iran and Iraq are not far behind.Look it up.

The oil off Venezuela''s coast is very heavy oil, costs lots to get & Lots to refine. Canada''s Oil sands are same. The oil shale in Colorado, Montana, N. Dakota is also shale, & also costs lots to get and refine. Those are only being taken advantage of due to bubble-inflated market prices, makin them profitable. Besides mexico nationalized its oil programs & isnt allowing any foriegn industry to capitalize on it right now. Venezuela did the same thing. China''s paying huge sums to african nations for their oil in cash/ infrastructure /development etc.
Almost all oil is on the market, & is inaccessable anywhere else but the market that speculators continue to drive up.
The US does not natioalize its own oil, therefore any oil that the industry digs up, goes out on the market to get the highest possible price for just like any other oil.
And the PROVEN reserves in ANWAR and places considered nature preserves is known to not be enough to make even a slight dent in the market prices so it would then only be a potential threat to humans, wildlife, and nature for the only benefit being more profits for an already gouging industry.

[cattlekate]

It time for the government to grab the bull by the horns. Either tax comodity investors 50% on their gains for oil and food comodities, separated tax form, or gradually remove oil and food from the commodity market, that investor can get out and go somewhere else. The speculators are ruining the economy for everone including the world.
Posted by ahrats at 06:37 AM : May 08, 2008

An excellent post which bears repeating.

And I will add - if oil is not removed from the commodity market, then make traders take possession of the product before reselling.

[jmagarotz]

I can''t wait til Hillary or Obama becomes Pres. and hits the oil companies with "Windfall Profits Taxes" and eliminates the "Tax Breaks" for both the oil companies and the American workers.

You Bush Haters will relive the gas lines and the "NO Gas Today" signs of the 70''s. By the time the libs are done with you you''ll be lucky to afford the gas to mow your own yards.

You, whiners, not Pres. Bush are the reason we won''t drill for the billions of barrels of oil that exist in ANWAR or off the coast of California. Yeah, I know, that oil is a "figment of Bushes imagination" LOL. Y''all are going to find out what imagination and reality are really about and fairly soon I''m afraid. By then it''ll be too late.

The old addage is true, "Those Who Forget Their History are Doomed to Repeat it"!!

[forthepeopl1]

ALL THEY HAVE TO DO IS MAKE ALL MORTGAGES FROM 2000 TO 2007 ALL GET RE-FI AT A GOOD RATE LIKE 1 OR 2 POINTS OVER PRIME, THATS ALL AND IT WOULD STOP EVERYTHING ONCE AND FOR ALL.

TAKE WHAT THE MORTGAGE IS NOW MINUS 60 % PERCENT OFF AND RE-FI EVERYONE..THIS WOULD STOP IT ALL, AND STOP PUTTING GOOD AMERICANS ON THE STREET.

I JUST HAD MY REALTOR APPRAISE MY HOME I BOUGHT 6 YEARS AGO, PAYED 300,000 FOR IT NOTHING SPECIAL IN A SMALL TOWN IN MASS, NOW HE SAID ITS WORTH MAYBE 150,000 BUT REALLY THINKS IT WORTH 100,000..SO GUESS WHAT WHAT THE BANK WILL OWN IT FOR 300,000 BECAUSE THEY DONT WANT TO HELP IN MAKEING THE VALUE THE 100,000 TO 150,000, AND EVEN AT THAT RATE HE SAID IS BETTER THAN WHAT THEY ARE GETTING AT FORCLOSER SALES, THEY ARE GETTING 20 TO 30 CENTS ON THE DOLLAR. SO IT WOULD MAKE SENCE TO JUST RE-FI EVERYONE AT 40 PERCENT AND START OVER. THIS WOULD STOP EVERYTHING...

[e-mail]

PLUS THIS IS MORE IMPORTANT NEWS. THIS IS WHAT SHOULD BE DONE TO STOP ALL FORCLOSERS

[forthepeopl1]

PETRO49L, SORRY, AMERICA GETS 3/4 OF ITS OIL FROM CANADA,AND MEXICO...........SO WHY DO WE WORRIE ABOUT OPEC???????????? PLEASE I WOULD LOVE TO SEE HOW AMERICANS THINK THAT OPEC HAS SOMETHING TO DO WITH WHAT IS GOING ON.

SO

[petro49l]

Arab oil is expensive because their reserve is depleted. American Oil Companies should lease sites throughout the Western Hemisphere. Energy Corporations would make billions of dollars overnight. North, Central, and South America have the deepest and richest reserves in the world. Oil rigs can be placed off shore or on land. Why pay OPEC now when in a few years those countries will beg to import oil?

[Gary Kempf]

ahrats;
I agree with you 100%, It won''t happen because if truth be known, I would wager my incentive check that those elected people that could make it law are many of the same speculators making the killing. I would like to see the Patriot Act used against those speculating in oil and food charged with with domestic terrorism. Under the wording those that endanger the economic stability of the United States can be charged. But that would probably also apply to the banking industry. Just wish somebody in Congress would grow some gonad''s!

[ahrats]

It time for the government to grab the bull by the horns. Either tax comodity investors 50% on their gains for oil and food comodities, separated tax form, or graduly remove oil and food from the comodity market, that investor can get out and go somewhere else. The speculators are ruining the economy for everone including the world.

[nonayabiness]

We stopped nearly all ''discretionary'' spending a long time ago. Saving every dime possible for what the road ahead may bring.

[ontheleft]

''consumers %u2014 the lifeblood of the U.S. economy %u2014 will be forced to pare discretionary spending to keep up with increasing costs for necessities''

What do they mean "will be forced"? They are already being forced. Every necessity is more expensive - heating bills, electricity bills, gasoline. The sale prices on food nowadays are what the regular prices were last year.

[singingrick]

Thanks Republicons!

[sparks224]

Isn''t this great!
Let''s all vote Republican again.

[fairandbal]

More of the same with John McSame!