Wall Street tumbled today as oil prices rebounded, fanning concerns that inflation will further pinch consumers and lead central banks to...
NEW YORK — Wall Street tumbled today as oil prices rebounded, fanning concerns that inflation will further pinch consumers and lead central banks to raise interest rates.
The Dow Jones industrial average fell 205.99 to 12,083.77.
Microsoft, one of the 30 Dow stocks, fell 77 cents to close at $27.12 a share. Boeing, also a Dow stock, declined 36 cents to $73.31.
Broader stock indicators also declined. The Standard & Poor’s 500 index fell 22.95 to 1,335.49, and the Nasdaq composite index fell 54.93 to 2,394.01.
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Investors are uneasy about oil prices, which today traded as high as $138.30 a barrel on the New York Mercantile Exchange before settling up $5.07 at $136.38. Having breached $139 a barrel last week, record-high crude has increasingly posed both an inflationary risk and a threat to growth.
Energy Department data released today showed that gasoline supplies grew last week but that crude oil inventories fell more than analysts expected. The weekly report suggested no letup in U.S. energy demand, even as consumers adjust their budgets to accommodate gasoline that averages more than $4 a gallon nationally.
The Federal Reserve’s Beige Book, which provides readings on the U.S. economy by region and arrives two weeks before the Fed’s next meeting, indicated that Americans are feeling pinched. The Fed said this afternoon that the economy remains “generally weak.”
“That certainly was not unexpected,” said Janna Sampson, director of portfolio management at Oakbrook Investments.
The central bank’s report did little to calm investors’ fears that have grown in recent weeks following the rise in oil prices and continuing credit woes.
“Obviously, I don’t know that the market likes hearing that, slowing spending or slowing growth and inflation at the same time,” Sampson said.
“There are not a lot of positive things you can point to right now,” said Michael Binger, portfolio manager at Thrivent Investment Management in Minneapolis. “We have commodity prices higher, inflation up, the prospect of the Fed raising interest rates instead of lowering, a worldwide slowdown and an economic slowdown in the U.S.”
Sampson said her reading from the Beige Book was that there “is not going to be another cut” in interest rates, but she didn’t see anything dire enough to forecast a rate hike at the Fed’s next meeting, because rising prices appear to still be “fairly well confined to commodities.”
“Unless we get some kind of numbers between now and the meeting at the end of the month that tell you inflation is really out of control,” Sampson said, she expects any rate hike is further down the line.