Stocks started the month of September with a wild, manic ride.
The Dow rocketing over 200 higher in early trading, fueled by
news that Hurricane Gustav did very little damage to the many
oil and gas platforms that dot the Gulf of Mexico. (It also spared
New Orleans, veering to the west instead of adding to the
devastation that his sister Katrina caused three years ago.)
The thought waves (or mass psychosis) that rippled through the
trading community focused on the positive effect that lower gas
prices would have on consumer spending. The sharp drop in oil
prices boosted the shares of airlines and consumer stocks. But
that wave soon crashed and receded as major oil stocks tanked,
dragging the rest of the market lower. All three major averages
finished in the red after posting strong gains in early trading.
(The tech-heavy Nasdaq was hit the hardest, losing just over
18 points, or 0.77 percent.)
It seems that a dive in oil prices was not enough to keep stock
prices afloat. Although the dollar continued its climb, equity
prices were held in check by continuing concerns over the
The Institute for Supply Management reported a slowdown in
manufacturing activity for the month of August. And the Commerce
Department said that construction spending fell 0.06 percent in July,
which, according to an Associated Press article posted in the NY Times,
was larger than expected.
Manufacturing activity has registered either miniscule growth
or outright contraction for most of this year. The construction
industry is still reeling from the excesses of the housing bubble.
Lower oil prices equate to a thin dinner mint as far as the nutrition
needed to move the US economy forward. Wall Street is slowly
and grudgingly accepting this reality, and September may be the
month that the fantasy of economic growth through lower gas
prices is extinguished for good.
Â©Greg Strid 2008