Wall Street tumbled Wednesday as the price of a barrel of oil surged soared to a record near $124 and touched off concerns that the stock market’s recent gains might have been premature while consumers grapple with rising energy and food costs. The Dow Jones industrial average fell more than 200 points.
Sharp gains in commodities prices have drawn fresh attention from investors worried that consumers — the lifeblood of the U.S. economy — will be forced to pare discretionary spending to keep up with increasing costs for necessities.
Oil prices have doubled over the past year, causing gasoline prices to surge further into record terrain and strap consumers, who drive more than two-thirds of economic activity, with yet another financial burden.
Wall Street slid Wednesday amid a cacophony of worries about the effects of rising prices. Kansas City Federal Reserve President Thomas Hoenig in a speech late Tuesday pointed to inflation as his main concern. Treasury Secretary Henry Paulson said in an interview with The Associated Press Wednesday that while the worst of the credit crisis might have passed, rising gas prices will dampen the benefits from the 130 million economic stimulus checks that the government is distributing.
While some investors say recent stock market gains had come too quickly anyway, others say the market’s declines reflect more serious worries about the difficulties blanketing consumers.
Ed Peters, chief investment officer at PanAgora Asset Management in Boston, said, “It is going to be a drag if we continue to get rising prices. The oil prices is just symptomatic of a broader trend.”
But Stephen Carl, head of equity trading at The Williams Capital Group, said that while rising oil prices appeared to rattle investors, many had also seen sizable gains from stocks in recent weeks and wanted to preserve their profits.
“Perhaps we fall away here for a few sessions,” he said the S&P 500’s rebound to the 1,400 level might have been too hasty for some investors.
According to preliminary calculations, the Dow Jones industrial average fell 206.48 points, or 1.59 percent, and closed at 12,814.35. The Standard & Poor’s 500 index lost 25.69 points, or 1.81 percent, and closed at 1,392.57. The Nasdaq composite index dropped 44.82 points, or 1.80 percent, and closed at 2,438.49.
An early reading of the KansasCity.com index of 145 regional companies showed a drop of 13.68 points, or 1.52 percent, at 889.20.
Among Kansas City area companies of interest:
I Aquila Inc. closed at $3.72, down 1 cent.
I Cerner Corp. closed at $46.61, down 43 cents.
I Commerce Bancshares Inc. closed at $43.17, down $1.07.
I DST Systems Inc. closed at $59.85, down 89 cents.
I Embarq Corp. closed at $43.79, up 34 cents.
I Garmin Ltd. closed at $42.89, down 96 cents.
I Great Plains Energy closed at $25.94, down 28 cents.
I H&R Block Inc. closed at $21.85, down 67 cents.
I Kansas City Southern closed at $45.78, down $1.29.
I Sprint Nextel Corp. closed at $9.14, down 5 cents.
I UMB Financial Corp. closed at $48.53, down $2.64.
I Waddell & Reed Financial Corp. closed at $34.00, down $1.78.
I YRC Worldwide Inc. closed at $18.16, down 75 cents.
The Closing Bell is compiled from staff and wire reports by Steve Rosen. Call him at 816-234-4879 or send e-mail to srosen@kcstar.com. A recap of the day’s markets activity is available in the Business section of The Kansas City Star.
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