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Wall St. & Business News – June 10th

With oil edging over closer to the elusive $150 price level, July crude settled a bit further away at $131.31 a barrel. A rebound in the U.S. dollar and weakening demand pressured crude prices down $3.04 in today’s session. According to the State Energy Department, crude demand is projected to scale back, cutting the current output by 240,000 barrels a day in 2008. OPEC nations are also reported to have increased oil output in this current quarter by roughly 500,000 barrels a day which may ease the recent spike in fuel prices.

Fuel prices by the same accord have risen to a national average of $4.043, a number derived from benchmark statistics of average prices from organizations such as AAA and Oil Price Information Service. Recently, a Goldman Sachs analyst projected that crude will reach $150 a barrel by July 4^th. If realized, average prices of gas could be driven up as much as $0.20-$0.30. Historically, the summer season has been met with the age old adage, “Sell in May and go away, “ but this summer may be a bit different due to oil’s overpowering influence on the market direction and investor sentiment.

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On Capital Hill, the senate republicans spared the largest five oil companies from an “unreasonable” windfall profit tax today. The proposed 25 percent tax would have been placed upon companies like Exxon Mobil, Chevron Corp., and Shell Oil in an effort to curb runaway profits.

“We are hurting as a country. We’re hurting individually as Americans … and the other side says, `Do nothing. Don’t even debate the issue,’” complained New York Senator Charles Schumer,. “We are hurting as a country. We’re hurting individually as Americans … and the other side says, `Do nothing. Don’t even debate the issue,’”

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Wall Street finished only a hair higher today by 9.44 points with both the Nasdaq Composite and S&P 500 leaving a mark and finishing in the red by 0.43% and 0.24% respectively. Apple’s iPhone 3G announcement boosted Apple shares today, as well as the dampening crude futures, but worries over consumer discretionary spending, inflation, and the most recent round of mortgage write-off had investors on their toes. With the consumer sector especially taking a bit of a hit recently with the elevated gas prices, Chris Colarik of Glenmede Investment Management in Philadelphia states,

“If you bet against the consumer over the past several years, you would’ve been wrong. The consumer has held up surprisingly well. However, at some point there is a breaking point. I think some people believe we may be approaching that.”

Some Wall Street analysts are also predicting close to another $170 Billion in losses due to the the collapse of the subprime mortgage market last summer. Other concerns of spill over into the auto and credit card markets also have investors on edge. If indeed a spillover occurs, high default rates on auto and credit card loans may eventually cause extended, unforeseen damage in the prime and equity markets, in addition to the already surmounting pain of losses.