Oil prices that soared to $65 a barrel choked off an early rally on Wall Street yesterday, pummeling the market's optimism about the economy...
NEW YORK — Oil prices that soared to $65 a barrel choked off an early rally on Wall Street yesterday, pummeling the market’s optimism about the economy in the process.
The Dow fell 21.26 points to 10,594.41.
Microsoft, one of the 30 Dow stocks, fell 40 cents to close at $26.95 a share. Boeing, also a Dow stock, slid 92 cents to $65.96.
Broader stock indicators also fell, having given up earlier gains. The Standard & Poor’s 500 index fell 2.25 to 1,229.13 and the Nasdaq composite index dropped 16.38 to 2,157.81.
Most Read Stories
- Costco is testing a new burger in Seattle, and it might remind you of Shake Shack
- UW study finds Seattle’s minimum wage is costing jobs
- Check out the Pike Place Market’s $74M addition: See 360-degree views of the new MarketFront VIEW
- The Willows Inn on Lummi Island to pay workers $149K for wage, overtime violations
- Calling their bluff: A Seattle doctor pegs what the GOP health bill is really about | Danny Westneat
Analysts said investors had begun the day confident that the U.S. economy will stay strong, absorbing both higher short-term interest rates and rising gasoline prices. But the erosion of stocks’ early advance — the Dow Jones industrials had gained more than 100 points, extending a rally from Tuesday — was proof that many investors remained uneasy and inclined to sell when oil climbs higher.
Crude hit an intraday record of $65 a barrel on the New York Mercantile Exchange before easing to a record close of $64.90, up $1.83 for the day.
The price of oil “clearly is the headline, and that’s probably causing the market malaise,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
The market initially was buoyed by confidence that the Federal Reserve’s decision Tuesday to raise short-term interest rates one-quarter percentage point to 3.5 percent wouldn’t harm the economy. The Fed also restated that its interest-rate policy is “accommodative” and future rate increases can continue at “a pace that is likely to be measured,” suggesting that the economy should continue expanding.
But investors turned around when oil prices resumed their climb despite new estimates from the U.S. Department of Energy of slower growth in world oil demand, which would put less upward pressure on prices.
Investors, already uncomfortable with a series of refinery outages, apparently focused on the department’s supply report, which showed a 2.1 million barrel decrease in the nation’s supply of gasoline.
They repeated a pattern from recent months, setting aside evidence of a strong economy to focus instead on oil’s rising price.
Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C., noted that “it’s somewhat surprising how resilient the economy has been, despite higher energy prices.”
The concern on Wall Street, however, is that “eventually, higher gas prices will eat away at consumers’ purchasing power … and slow economic growth,” Vitner said.
Shares in oil companies soared along with oil prices. Chevron rose $1.26 to $62.48, while Exxon Mobil advanced 73 cents to $59.90. BP rose 94 cents to $70.58.