Crude prices at record $100.01
February 20, 2008
On the nineteenth of February the crude oil prices reached a record $100.01 barrel and the price of gold and other commodities as well went higher. This resulted in the stocks sliding down which erased the small gains it had achieved in the session. The increase in oil and gold prices is raising many worries about what the impact of inflation would be on the already troubled US economy.
Another factor which prompted the stocks to slide towards the end of the day was the weakness of the telecom stocks and the problems the banking sector is going through currently.
INDU (the Dow Jones industrial average) and the SPX (Standard & Poor’s 500) index finished the session with small declines while COMP (the NSADAQ composite) lost 0.7 percent in the end of the day. As the trading came to an end the computer maker HP announced its fiscal first quarter sales which was higher than the forecasts.
The day’s trading had started well and was doing well till mid day when the prices of crude oil went up. The 3 main indexes in the country had posted significant gains but this got erased by afternoon as the increase in crude price gained momentum. The fact that the increase in prices happened during a period when there are widespread worries of OPEC cutting down on its oil production made the situation even worse.
Even while the increase in oil prices will help in boosting the value of energy stocks the very high price is definitely going to weigh deep down in the minds of investors. The fact that the price of gold also increased on the 19th also will make the investors hesitant in making their moves. The gold prices increased by almost $24 per ounce on the nineteenth. The increase in gold and other commodities is considered as a clear cut indication of inflation starting off.
As a result of the slide of stocks the treasury prices took a dip. The slump in treasury prices led to raising the yield on the benchmark ten year note to 3.89 percent from 3.78 percent on Friday. The US dollar dropped against the other currencies of the world.
The banking sector in the country continues to be trouble. The Lehman Brothers dropped by 2.5 percent on 19th after it was reported that they could face a write-off because of its contact to various bad mortgage bets. The Credit Suisse Group (CS) also went down by 5.2 percent after they said that they would have to slice its profit by $1 billion in the first quarter after the traders priced the value of its holdings in asset backed securities at a very high level of almost $3 billion. The European bank later reported that these traders have been suspended.
20th is going to be very important for the investors as many reports regarding the consumer prices, housing starts and building permits will be coming out on the day. The Minutes from the Federal Policy meeting will also be published by the evening of 20th.