The stock market came tumbling this morning on the bad news that started yesterday with Federal Reserve Chairman Ben Bernanke’s bleak economic outlook. With the news that there were higher than expected new unemployment claims, a drop in new housing sales and the announcement from the International Energy Agency that they would release 60 million barrels oil, sent stocks, oil and gold prices in to a downward spiral.
This isn’t necessarily all bad news. Lower the price of oil that has been driven wholly by speculators that have “no skin in the game” has been a major cause of the economic slow down. As the price of fuel drops, the price of transportation and goods fall, people have more money to spend or invest.
Global Oil Reserves Tapped in Effort to Cut Cost at Pump
The United States will lead an international effort to release 60 million barrels of petroleum reserves to world markets, replacing some of the oil production lost because of the conflict in Libya, the International Energy Agency announced in Paris on Thursday.
The action is aimed at reducing energy prices for businesses and consumers, and in early trading futures contracts for West Texas intermediate crude oil were down $4.50 a barrel to around $91.
The United States will release half of the total amount from the Strategic Petroleum Reserve, with the rest of the oil to be provided by other nations among the international agency’s 28 member states. Negotiations for the coordinated response have been going on in secret for weeks, according to a person involved in the talks. Similar unified action was taken in 1991 at the outbreak of the first Persian Gulf War.
The Dow Jones industrial average fell sharply and energy stocks declined more than 2 percent on Wall Street on Thursday after a report that the United States would release some oil from its Strategic Petroleum Reserve. Crude oil prices also fell.
The International Energy Agency announced in Paris on Thursday that the United States will release half of the 60 million barrels of petroleum reserves to world markets, with other nations releasing the rest, replacing some of the oil production lost due to the conflict in Libya.
More Americans than forecast filed first-time claims for unemployment insurance payments last week, showing companies are less confident about the expansion than they were earlier this year.
Applications for jobless benefits increased 9,000 in the week ended June 18 to 429,000, Labor Department figures showed today. The level of claims exceeded the highest estimate in a Bloomberg News survey in which the median projection called for 415,000 filings. The number of people on benefit rolls was little changed, while those getting extended payments rose.
Unemployment claims have swelled after dropping to an almost three-year low at the end of February, indicating businesses may be reluctant to hire until demand strengthens. The data underscore Federal Reserve Chairman Ben S. Bernanke’s comment yesterday that job growth is “frustratingly” slow, a reason policy makers pledged to maintain monetary stimulus.
May new home sales fall 2.1 percent
(Reuters) – Sales of new U.S. single family homes fell for the first time in three months in May, but inventories of new homes for sale reached record lows and the median sales price rose slightly, a government report showed on Thursday.
Gold Drops Most in Seven Weeks as Slow Economy, Oil Slump Ease Inflation
Gold futures plunged the most in seven weeks as a slowing U.S. economy and slumping oil prices eased the risk of inflation, while the dollar rallied on signs the Federal Reserve won’t add more stimulus measures.
The economy is recovering at a “moderate pace, though somewhat more slowly” than the central bank had expected, Fed Chairman Ben S. Bernanke said yesterday. The dollar gained as much as 1.4 percent versus six major currencies, while oil prices dropped to a four-month low after the International Energy Agency said its members would release crude from strategic reserves.
“It’s basically down on what the chairman said yesterday,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Also, crude is sharply down, while the dollar has risen.”
Treasuries Gain as Jobless Claims Rise, Trichet Cites European Bank Risk
Treasuries rose as U.S. initial jobless claims climbed last week more than economists forecast and European Central Bank President Jean-Claude Trichet said the sovereign-debt crisis threatens to infect banks.
Yields on 10-year notes dropped toward the lowest level this year a day after the Federal Reserve said it will maintain monetary stimulus after its $600 billion program of debt buying ends this month, with policy makers lowering their forecasts for economic growth and employment.
“It’s just uncertainty,” said Dan Mulholland, a Treasury trader in New York at Royal Bank of Canada, one of 20 primary dealers that trade with the Fed. “Jobless claims provided the latest pop. Treasuries are the beneficiary.”
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