- The Washington Times - Saturday, June 7, 2008

NEW YORK (AP) | Stocks plunged Friday, sending the Dow Jones industrials down nearly 400 points, after oil prices shot up by more than $11 a barrel and neared $140 a barrel - and in the process wiped out investors’ recent optimism about the economy.

The prospect of higher energy prices that could hobble consumers and worsen a slowing economy had investors frenetically pulling money out of stocks. The bad news about rising energy prices compounded investors’ anxiety over a worrisome reading on unemployment, which for May showed its biggest monthly rise since 1986.

The decline in stocks also helped drive bond prices sharply higher as investors sought a more secure place for their money.

On Wall Street, crude’s soaring price intensified worries that ever-expensive fuel will lead consumers to curtail their spending on nonessentials. With gasoline at the threshold of a national average of $4 a gallon, crude’s surge higher is expected to propel gas even higher - and make Americans even more reluctant to spend.

Moreover, the spike in energy prices came as the Labor Department said the nation’s unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.

The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace given that May marked the fifth straight month of job losses.

The Dow Jones industrial average fell 394.64, or 3.13 percent, to 12,209.81. It was the worst percentage and point drop since Feb. 27, 2007, when the blue chips dropped 416.02 points, or 3.29 percent, as concerns emerged about troubles in the credit market and an economic slowdown.

Broader stock indicators also fell sharply. The Standard & Poor’s 500 Index lost 43.37, or 3.09 percent, to 1,360.68, and the Nasdaq Composite Index fell 75.38, or 2.96 percent, to 2,474.56.

Friday’s pullback came a day after the Dow jumped nearly 214 points, its largest daily point gain since April 18 and a reaction to better-than-expected sales from retailers and a dip in weekly jobless claims. The welcome economic news helped investors shrug off a more than $5-a-barrel spike in oil prices. But the advance in oil Friday made it clear to Wall Street that oil posed a serious threat to consumer spending and the economy.

Friday’s session punctuated an erratic week for the markets. Stocks fell Monday and Tuesday before moving sideways Wednesday and surging Thursday. The back-and-forth moves left the Dow down 3.39 percent for the week, the S&P; 500 off 2.83 percent and the Nasdaq with a loss of 1.91 percent.

Bond prices jumped Friday after the weak jobs data sent investors scurrying for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 4.04 percent late Wednesday.

The dollar declined against other major currencies - a move that makes each barrel of oil more expensive. Gold prices rose.

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