Dow plunges as oil prices break records

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Friday, June 6, 2008

Pay-at-the-pump gasoline pump at a filling station in Indiana.
Image: Derek Jensen (Tysto).

The Dow Jones industrials lost more than 400 points on the day today after news of record high oil prices and an increase in unemployment.

Friday's nearly US$11 per barrel increase in the July contract for crude oil on the New York Mercantile Exchange (NYMEX) is the largest singe-day increase in oil price history. The July contract hit $139.12, breaking the previous record. The July contract settled at $138.54, also a new record. The previous record for the July contract was $135.09 and was set on May 22. Trading in the July contract terminates on June 20.

Stephen Schork, an oil industry analyst and editor of the "Schork Report," said, "The bulls are running rampant and the bears have panicked...It's pure hysteria, absolute panic."

Morgan Stanley oil analyst, Ole Slorer, released a report this morning saying that he expected a "short-term spike in oil prices," as high as $150 a barrel by mid-July.

Adding to the concerns of oil traders was a statement by Deputy Prime Minister Shaul Mofaz told Yediot Ahronot, the most widely circulated paper in Israel that "If Iran continues its program to develop nuclear weapons, we will attack it." Mofaz is considered a candidate as the next Prime Minister.

The average price for regular unleaded gasoline has already passed the $4 a gallon mark in 12 states, as well as in Washington, D.C., according to AAA.

Meanwhile, the Labor Department reported Friday that the unemployment rate rose to 5.5% last month. This was an increase from the 5% rate in April, and was the biggest monthly jump in more than two decades. Wall Street had only predicted an uptick to 5.1% for the month.

According to the Labor Department, 49,000 jobs were lost in May, adding to four straight month of job losses.

The Dow was not the only stock that fell today, the Standard & Poor's 500 index lost 43.37, or 3.09 percent, and the Nasdaq composite index fell 75.38, or 2.96 percent.

Also today, the American dollar declined against other major currencies, including the Euro.