NEW YORK (AP) - Wall Street stumbled yesterday after oil prices spiked to a record above $129 a barrel and a government report raised investor concerns about the impact of inflation on consumer spending. The Dow Jones Industrial Average fell nearly 200 points.
Crude jumped after OPEC’s president was quoted as saying his organization won’t raise its output before its next meeting in September. That sent a barrel of light, sweet crude to a trading high of $129.60 before it finished just above $129 a barrel on the New York Mercantile Exchange.
Meanwhile, the Labor Department’s producer price report indicated higher energy and food prices might be seeping into other parts of the economy - compounding investors’ concerns raised by higher oil. The department said wholesale inflation edged up by 0.2 percent in April following a 1.1 percent jump in March but, aside from food and energy, prices rose by a faster 0.4 percent - double what analysts expected.
Wall Street is worried that a drop-off in consumer spending could ensue if wholesale price increases are passed along; consumer spending is critical because it accounts for more than two-thirds of the U.S. economy.
The retreat in major indexes reversed the optimism of last week, when stocks rose on a growing belief that the economy is still managing to plod along despite worries about both oil prices and the global credit crisis. The loss showed that the market has yet to shake off the volatility that has plagued it since the credit crisis began last summer.
The mood on Wall Street was further depressed yesterday by sluggish retail reports and comments from Federal Reserve Vice Chairman Donald Kohn that policy-makers are inclined to hold interest rates steady.
The Dow fell 199.48, or 1.53 percent, to 12,828.68, logging its biggest daily slide since a 206-point drop on May 7.
Broader market indexes also retreated. The Standard & Poor’s 500 Index shed 13.23, or 0.93 percent, to 1,413.40, and the Nasdaq Composite Index dropped 23.83, or 0.95 percent, to 2,492.26.
Bond prices rose as investors sought the relative safety of government securities. The yield on the benchmark 10-year Treasury note, which moves opposite its yield, fell to 3.78 percent from 3.83 percent late Monday.
Gold gained, and the dollar fell against other major currencies.
Meanwhile, the Federal Reserve Bank of Chicago reported that U.S. economic activity weakened further in April and reached its lowest level since the 2001 recession.
Investors did get some data on consumer spending during the session. The International Council of Shopping Centers and UBS Securities showed chain-store sales fell 0.4 percent during the week of May 17, down from 1 percent the previous week.
Investors also mined earnings reports from Home Depot Inc., Target Corp., and Staples Inc. for clues about consumers.
Home Depot fell $1.50, or 5.2 percent, to $27.37 after it reported first-quarter profit fell 66 percent amid a continued housing slump.
Target reported that profit dropped almost 8 percent on higher costs, but it beat expectations. Shares fell 63 cents to $54.29.
Staples said profit rose 1.5 percent during the quarter, and reaffirmed its outlook. Shares rose 4 cents to $23.61.
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