Thursday, June 23, 2011

Exile On Wall Street

Steve Schaefer

Flood Of Selling Hits Exxon, Chevron As U.S. Releases Oil Reserves

Wall Street was rocked Thursday morning by news that the Obama Administration would tap the Strategic Petroleum Reserve, ongoing concerns about Greece’s fiscal condition and the latest wrinkle in the debate over the U.S. debt ceiling. The declines come amid ongoing concerns that the soft patch in the U.S. economy could deepen, concerns that Federal Reserve Chairman Ben Bernanke was unable to dispel in his press conference Wednesday.

The dollar surged, with the euro down to $1.4187 from $1.4355 Wednesday, while crude oil dropped more than $4 to $91.37 a barrel after the news that the International Energy Administration will release 60 million barrels of oil over the next thirty days. Half that stockpile will come from America’s reserves, in what may turn out to be a type of economic stimulus at a time when the Fed is preparing to end its $600 billion bond-buying program, QE2. (See “Obama Taps Petroleum Reserve. Consider This QE3.”)

If oil prices stay in the low $90 range, or go lower, it should provide a boost to consumer spending on the margin, which was under pressure for much of this year as crude prices raced to their peak above $110.

Stocks came off their morning depths in afternoon trading, but were still under heavy pressure. The Dow Jones industrial average was off 1.3%, or 154 points, at 11,956, with oil majors Chevron and Exxon Mobil its worst performers, down nearly 3% each. The S&P 500 lost 1.1%, or 15 points, to 1,272. The Nasdaq was in better shape, down just 0.3% at 2,662.

Pfizer was a rare bright spot in the blue-chip Dow, rallying more than 2% after announcing favorable trial results on a drug aimed at preventing strokes late Wednesday. (See “A Victory For Pfizer, Bristol-Myers.”)

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