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Oil to keep stock investors on edge

Oil to keep stock investors on edge
Sunday, August 28, 2005

NEW YORK: As the summer of discontent over runaway oil prices comes to an end, stock investors will pore over key US economic data, including Friday’s August payrolls report and retailers’ monthly sales figures, for signs of how big a toll crude’s surge has taken on the economy.

With oil hitting a record $68 a barrel this week, Wall Street’s fear is that consumer spending and corporate investment will suffer. When companies and individuals have to devote more of their available cash to pay more for gasoline, electricity and other energy costs, that leaves less to spend on business equipment, clothing or other items.

“With the increased focus on the potential of an economic slowdown, driven by the higher energy prices, anything that comes out of the economic data to either support or refute that is going to be key,” said John Caldwell, chief investment strategist at McDonald Financial Group, of Cleveland.

School bells, factory whistles: On Thursday, major US retailers will report August sales, providing a gauge of consumer spending during the key back-to-school shopping season. The same day, August US car and truck sales are due, with economists expecting a decline from July levels. A report on personal consumption also is due on Thursday, with the forecast calling for a gain, according to economists polled by Reuters.

The consumer confidence index for August from the Conference Board, a private research group, kicks off the week’s economic calendar on Tuesday. The forecast calls for the index to slip to 101.5 from a previous reading of 103.2, according to economists polled by Reuters. July factory orders, due on Tuesday, are expected to drop, compared with a previous month’s gain.

In contrast, the Institute for Supply Management’s August index of US manufacturing activity, due on Thursday, is expected to show a slight pickup in pace from July. If a weaker-than-expected reading comes in on any of these data points, Wall Street could take that as a sign that high oil prices are weighing on the economy.

Jumping crude, falling stocks: Oil’s surge to yet another record this week took a toll on the major US stock indexes. On Thursday, US crude jumped to $68 a barrel, the highest price since oil futures started trading on the New York Mercantile Exchange in 1983.

For the week, stocks fell, giving up their mid-summer gains. The blue-chip Dow Jones industrial average finished the week down 1.5 percent, while the broad Standard & Poor’s 500 index slipped 1.2 percent, and the tech-laced Nasdaq Composite Index declined 0.7 percent. reuters


LINK: http://www.dailytimes.com.pk/default.asp?page=story_28-8-2005_pg5_36