Monday, April 21, 2008

Oil and Gas Killing Economy

Regardless of the causes, the recent spike in the prices of crude oil and gasoline are killing the US and other economies. Middle and lower class consumers are the hardest hit and also the least likely to continue spending on other goods and services, since the cost of transportation has risen more than 35% over the past year and has also caused the price of another basic element of life - food - to skyrocket in the past 3 months.

Higher energy prices overall are great for oil and utility companies, but they come at the expense of curtailed retail spending in nearly all other areas and also contribute to a vicious price spiral since almost all goods are transported. Similarly, most services have energy expenses they cannot absorb, and these are passed along to the consumer in the guide of higher prices.

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The entire world is feeling the pain from the seemingly unending rise in the price of basic fuel, and with gas nationwide at $3.50 per gallon in the US, average people and businesses are having a hard time keeping pace, much less enjoying the fruits of their labors.

Thus far, the stock markets and big business have been able to maintain profitability in the face of spiraling fuel costs, but a significant pullback by consumers will damage (and already have) some segments of the business community. It's difficult to cut back on fuel expenses for most individuals, so in this case, the Exxons and Chevrons of the world win, at the expense of everything else.

Dow 12,825.02 -24.34; NASDAQ 2,408.04 +5.07 (0.21%) S&P 500 1,388.17 -2.16; NYSE Composite 9,312.29 +2.05

The major indices finished mixed, with the Dow and S&P lower, while the NASDAQ and NYSE Composite posted marginal gains. Actually, all of the indices were lower for the better part of the day, but regained much of what they lost thanks to a late-day surge.

After all was said and done, declining issues outpaced advancers, 3521-2749. New highs outdid new lows for the second straight session, though only marginally, 183-177. All indications are that the market is searching for direction in the aftermath of 4-5% gains last week.

Oil closed at a new record of $117.48, up 79 cents on the day. Gold gained $2.40 to $917.60, while silver lost 46 cents to close at $17.36.

Companies reporting earnings were mostly in line with expectations, though Bank of America (BAC) experienced a 77% decline in earnings for the first quarter on a year-over-year basis.

Bank of America's shares dropped 95 cents, to $37.61.

NYSE Volume 3,379,862,250
NASDAQ Volume 1,636,458,250

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