Crude oil prices hit a new high today and stocks hit new lows.
The Nasdaq Stock Market composite index and the Standard & Poor's 500 stock index fell to new lows for the year and the Dow Jones industrial average dropped back below 10,000 in one of Wall Street's worst days of the year.
The Dow dropped to 9,963.03, losing more than 163 points or 1.61 percent, its worst one-day decline since March.
The Nasdaq fell more than 33 points -- 1.8 percent -- to ,821.63, which was not only its lowest point of the year, but its lowest since last September.
The S&P 500 lost 18 points, or 1.6 percent, falling to 1,080.70, a new low for the year and its lowest since Dec. 17. In another sign that Wall Street thinks the economy is weakening, interest rates on government bonds fell for the seventh day in a row, bringing the rate on 10-year notes to 4.40 percent.
Stocks and oil prices have been on a teeter-totter recently, but today's tilt was exaggerated by the impact record energy prices are having on consumer spending.
Major retail chains reported the sales slump that began in June continued into July, as consumers cut back on other purchases to make up for what they are spending at the gas pump.
The International Council of Shopping Centers reported July sales increased just 3.3 percent at stores that have been open for a year or more -- a metric that factors out the effect of chains opening new stores.
Wal-Mart, the nation's biggest retailer, came in just below that average with a 3.2 percent gain over last year and same-store sales were down at the Gap, Kohl's and Sears.
Most retail stocks retreated as the major chains trickled out their monthly sales reports. An index of 30 retail stocks fell 2.6 percent. As those stocks pulled back so did the market.
Opening significantly lower, the market accelerated downward toward the closing bell as traders speculated that Friday's July jobs report will bring even more bad news. No significant improvement in the unemployment rate is expected and the worry now is that job growth will prove disappointing.
With gasoline prices already 25 percent higher than they were a year ago, investors were discouraged to see crude oil prices bounce upward by more than $1.50 a barrel on the New York futures market.
Crude to be delivered next month closed at $44.41 in response to the latest episode in the Russian oil opera that is driving the market -- the tax fight between the Russian government and Yukos Oil, the biggest Russian exporter.
The latest twist is that the government is not going to let Yukos use the bank accounts it needs to pay operating expenses. Yesterday, when the government was going to let Yukos have the money, oil prices went down.
Even people who don't understand all the politics and policies involved in the Yukos case think that if Yukos stops pumping oil, prices will go through the roof, so the market moves with ever melodramatic moment.