By Jason Simpkins
Associate Editor
The benchmark crude oil rose 57 cents to settle at a record-high $140.21 a barrel on the New York Mercantile Exchange Friday, after a sell-off on Wall Street left the Dow Jones Industrial Average in bear territory.
After plummeting 358 points on Thursday, the Dow dropped another 107 points to end the week at 11,346.51. After sliding 4.2% last week, the Dow is now down 20% from its Oct. 9 high of 14,165. And that means the benchmark U.S. index has officially entered into a bear market.
“With oil prices bursting through the $140 threshold and seemingly unstoppable, economists are busily debating whether it’s all going to end in fire (inflation) or ice (deep recession),” said Doug Porter, senior economist at BMO Capital Markets.
“Equity markets aren’t so concerned about the fineries of the debate, but are instead much more focused on the ‘it’s all going to end’ portion of the discussion,” he wrote in a note, seen by MarketWatch.com.
Story continues below…
Whether inflation or growth should remain the No. 1 concern of the U.S. economy is a question that was thoroughly discussed last week by the policymaking Federal Open Market Committee (FOMC) at its meeting Tuesday and Wednesday.
The U.S. Federal Reserve voted to hold the Federal Funds rate steady at 2.0% last Wednesday despite mounting inflationary pressures.
Several recent economic reports showed the U.S. economy remains sluggish at best. Consumer sentiment is at a record low, unemployment climbed 0.5% in May to 5.5%, housing values seem to be in perennial decline.
“Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,” the FOMC statement read.
“The Committee expects inflation to moderate later this year and next year,” the statement read. ”However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.”
News and Related Story Links:
-
Money Morning:
Fed Holds Rates Steady in Face of Upside Inflation Risk
Click here for audio and video featuring your favorite Money Morning contributors.
RSS
[...] and lowered future estimates; and General Motors Corp.’s (GM) stock price fell to a 53-year low. Oil prices surged further into record territory (over $142/barrel) on some untimely comments by the leader of the Organization of the Petroleum [...]
[...] Source: Crude Hits Another Record High Above $140 addthis_url = ‘http%3A%2F%2Fdev.contrarianprofits.com%2Farticles%2Fcrude-hits-another-record-high-above-140%2F3339′; addthis_title = ‘Crude+Oil+Prices+Hit+Another+Record+High+Above+%24140′; addthis_pub = ”; Liked this article from Money Morning? You can receive the same great commentary and insights directly to your email box when you claim your free subscription to the Money Morning eletter service. Simply fill in your email address below and hit ’subscribe’.Email Address:SubscribeNO-SPAM PLEDGE: We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from Money Morning with a few clicks.Related ArticlesEric Roseman Says Beware of ‘Inverse Inflation’ Bush’s Rebate Checks Stimulate Arab Economies!Americans Must Cope With a Lower Standard of Living Tags: bear market, Crude Oil Prices, Jason Simpkins, peak oil, stagflation, US Gas Prices, Us Inflation Rate, US recession [...]