Oil prices ''dictate US stock market movements''
Published: 10 June 2008
By MoneyhighStreet Staff 1 Comment
Updated: 30 November -0001
Falling oil prices helped support the US stock markets on Monday (June 9th), but traders remained cautious following last week''s slump.
The Nasdaq composite index ended the day on 2459.46, down 0.61 per cent, while the Dow Jones industrial average rose over 0.5 per cent following Friday''s fall – the largest in 15 months.
Business Week reported that the rise, which was also echoed on the Standard & Poor''s 500-stock index, was a direct result of falling oil prices, which slipped $4 (£2) per gallon during trading.
The situation highlights how oil-dependent the US markets have become, with Friday''s slump being viewed as a direct result of oil prices climbing rapidly.
Richard Sparks, of Schaeffer''s Investment Research, told the publication that "the market is moving in the opposite direction of oil".
Thomas J. Lee, chief US equities analyst at J.P. Morgan Chase, added to the Associated Press: "It''s hard for anyone to jump in whole hog after Friday. I think everyone''s going to watch oil, and I think it''s going to paralyse us for a while."
Many experts were suggesting that investors would look to put their capital into larger blue chip companies, which are considered safer during economic downturns.
I find it interesting that billionaire financier George Soros calls this OIL phenomena a Bubble when everyone else sees a sharp spike in oil prices. He says he believes there are lots of bubbles building in financial markets, and in OIL. To quote him he says “He believes better regulation is necessary to keep commodity prices at more reasonable levels.” That’s what I have also been saying. The government needs to step in and do something about commodities trading. First of all, OIL and Gas should not be traded like poker chips. The consequences of a mistake are far too grave. Look whats happening in Europe now with strikes and protests etc. Imagine if the same thing happened here. To help make my point imagine if we traded wheat commodities and wheat jumped 100 percent so traders all jumped in and bought more driving the cost up even higher… soon the whole world would starve because wheat prices would skyrocket. There are probably controls on wheat trading so this can’t really happen but what about oil. Can Investors drive the price up indefinitely? What controls are in place to prevent a huge spike in prices on the NYMEX. Oil is a key commodity and it’s basic for the proper operation of commerce in America. For investers to gamble with this commodity in Futures speculation is very irrational and irresponsible. I firmly believe there needs to be safety controls in place to prevent greed driven spikes in prices on the commodities exchange the same as there were safety controls implimented after the great crash of the Thirty’s to prevent a bottoming out of stocks. It’s a big game to them… but if the rules of the game are flawed then accidents happen. A huge spike could take prices through the roof and this would not be good for for anyone except PERHAPS for the speculator involved. The Canadian Government is investigating this as we speak and rightly so. If other governments follow suit then futures traders may be forced to follow new rules of trading. Visit our website and take part in our gas poll on http://www.nbtv.ca