Oil price rise puts pressure on Wall Steet

Oil price rise puts pressure on Wall Steet

Wall Street tumbled today 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 US 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 amid a cacophony of worries about the effects of rising prices. Kansas City Federal Reserve President Thomas Hoenig in a speech late last night pointed to inflation as his main concern.

Treasury Secretary Henry Paulson said in an interview with The Associated Press 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."

However, 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 sizeable gains from stocks in recent weeks and wanted to preserve their profits.

"Perhaps we fall away here for a few sessions," he said.

According to preliminary calculations, the Dow fell 206.48, or 1.59%, to 12,814.35, after fluctuating early in the session.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 25.69, or 1.81%, to 1,392.57, and the Nasdaq composite index fell 44.82, or 1.80%, to 2,438.49.

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