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Dow Closes Down 164 on Surging Oil Prices

Associated Press
08.05.2004

Another surge in oil prices sent stocks plummeting Thursday, with the Dow Jones industrial average shedding more than 160 points, the second-largest one-day drop of the year.

According to preliminary calculations, the Dow fell 163.48, or 1.6 percent, to 9,963.03. The Dow closed below the 10,000 mark for the third time in the last 10 sessions. The Dow lost 168 points on March 11, when the markets turned sharply downward to end the 2003 rally.

Broader stock indicators also fell sharply. The Standard & Poor's 500 index dropped 17.93, or 1.6 percent, to 1,080.70, and the Nasdaq composite index was down 33.43, or 1.8 percent, at 1,821.63.

Investors reacted strongly to the oil hike, selling off rapidly as the afternoon progressed. A barrel of light crude closed at $44.41, up $1.58 cents, on the New York Mercantile Exchange, and traded as high as $44.50 per barrel earlier in the session.

Over the past few weeks, drops in stock prices have corresponded almost directly to rising oil prices, which have climbed on terrorism fears. Thursday's rise, attributed to Russian oil conglomerate Yukos' ongoing troubles with the government there, prompted heavy selling in the last hour of trading.

"We've had some good economic numbers, but with the high price of oil and the terror alert, there's a lot of pressure on the market on a short-term basis," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. "These oil prices will eat away at consumer confidence, consumer spending and start to affect business decision making."

Oil prices dominated investors' thoughts, causing them to ignore other news, both good and bad. The Labor Department reported a drop of 11,000 first-time unemployment filings, and said the number of people who continue to receive benefits fell by 35,000 to 2.91 million - down from 3.62 million a year ago.

Many investors, however, were waiting to see what clues the jobs creation report would have about economic growth. Last month's report fell markedly short of expectations.

Retail sales figures, another key barometer of economic health, failed to live up to expectations. Major retailers announced mixed sales data Thursday, with many apparel merchants issuing disappointing numbers. Companies including Wal-Mart Stores Inc. and Target Corp. had stronger sales in July that were mostly in line with expectations, but investors were hoping for better news. Wal-Mart fell 87 cents to $52.33, while Target skidded 98 cents to $42.15.

The concern on Wall Street is that the retail numbers reflect consumer distress over rising prices, particularly oil. Higher oil prices could cause inflation as retailers pass higher shipping costs to customers, and curtail consumer spending as Americans pay more for gas.

 

 

 

 

 

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