Posted on: Friday, April 1, 2005
Fears of oil 'price spike' undercut stock prices
By Meg Richards
Associated Press
NEW YORK — Stocks sagged yesterday, ending a lackluster quarter in negative range as investors weighed rising U.S. incomes and consumer spending against lofty oil prices, which rose following an investment bank's suggestion that energy is in the early stages of a bull market.
The report seemed to have an impact on trading, nonetheless; crude futures surged $1.41 to $55.30 per barrel on the New York Mercantile Exchange — difficult for stock investors to ignore.
Advancers outnumbered declining issues by about 4 to 3 on the New York Stock Exchange. Consolidated volume showed 2.28 billion shares traded, compared with 2.18 billion on Wednesday.
"The important thing today, the only thing of significance, is the oil figure," Herrick said. "That is the most troubling thing for the market because it has a long-term negative effect on the economy and could act as a drag on profits. Everything else indicates the economy is in glide path for continued strength. The increases in interest rates so far have had no impact on the economy, so that's not an issue. Oil is the issue."
Treasurys rallied for a third day, with yield on the 10-year note dropping to 4.48 percent, from 4.55 percent Wednesday.
Hiring gains sent U.S. incomes up by 0.3 percent in February, but consumer spending climbed at an even-faster 0.5 percent pace, the Commerce Department reported.
The report from Goldman Sachs warned oil is entering a "super spike" period that could drive prices as high as $105 per barrel, but many on Wall Street were skeptical about the call. The only thing that could take crude to such high levels would be a major disruption in supply from Iran, Iraq or Saudi Arabia, which seems unlikely at this point, said Tracy Herrick, chief economist for the Private Bank of the Peninsula, in Palo Alto, Calif.
