Investors Flee Stocks As Oil Surges Close to $140
Saturday, June 7, 2008
NEW YORK, June 6 -- Stocks plunged Friday, with the Dow Jones industrials having their worst day in more than a year, after oil prices shot up by more than $11 a barrel and neared $140, wiping out investors' recent optimism about the economy in the process.
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.
According to preliminary calculations, 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. Standard & Poor's 500-stock 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.
Crude oil has had a huge price rebound this week after falling amid a drop in demand for gasoline. The jump continued Friday; light, sweet crude passed $139 before settling at $138.54, a gain of $10.75 in the regular session. The surge followed a Morgan Stanley analyst's prediction that crude would reach $150 a barrel by July 4; a decline in the dollar and fresh tensions in the Middle East added to crude's advance.
On Wall Street, crude's soaring price intensified worries that ever-more-expensive fuel will lead consumers to curtail their spending on nonessential items. Average gasoline prices are close to $4 a gallon nationwide, and crude's surge is expected to propel prices even higher -- and make Americans 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 percent in April.
The decline in stocks also helped drive bond prices sharply higher as investors sought a more secure place for their money.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.91 percent from 4.04 percent late Thursday.
Citigroup lost $1.16, to $20.06.
Washington Mutual fell $1.08, to $7.53.
Microsoft dropped 81 cents, to $27.49.