As if playing the stock market weren?t hard enough already, investors now have to keep their eyes on several economic areas of concern while managing their portfolios.
“We believe the market is reacting to three main areas,” said E. William Stone, chief investment strategist for PNC: “the high price of oil, concerns around economic data and continued weakness in the financial sector.”
Oil prices settling above $130 a barrel, news that the U.S. unemployment rate jumped to 5.5 percent in May from 5 percent in April, and uncertainly among large financial institutions add pressure to an “already fragile U.S. economy,” Stone said.
The Dow Jones Industrial Average ended a turbulent week last week up more than 165 points Friday after a slight drop in oil prices eased worries about the effect of rising prices on consumers. A barrel of light, sweet crude declined $1.88 to $134.86 on the New York Mercantile Exchange on Friday.
Stocks went through a steep sell-off Wednesday on fears the Federal Reserve would be forced to raise interest rates to combat inflation. Consumer prices rose by 0.6 percent in May, the biggest one-month increase since November, the Labor Department reported Friday.
Michael Strauss, chief economist at Commonfund, said the advances seen Thursday and Friday belie some of the unease among investors that inflation, while somewhat in check now, could pop in the coming months.
“Behind the scenes of the euphoria … they?re still very nervous about financial market conditions, and they?re still very nervous about economic conditions,” Strauss said.
Among companies in The Examiner Top 10, a portfolio of some of the largest publicly traded companies with significant influence in the Baltimore region, Baltimore companies Provident Bank, Under Armour and Legg Mason have all had a rough first half of 2008. Provident?s share price is down about 67 percent since the beginning of the year, while Under Armour and Legg?s share prices are down about 27 percent.
While the Dow is down about 7 percent since the beginning of the year, it appears oil price increases and economic concerns will only add to future stock market uncertainty.
“The market fears unknowns more than large knowns,” Stone said.
The Associated Press contributed to this article.
