NEW YORK (Reuters):
UNITED STATES equity investors who recently ignored the ups and downs in oil prices may need to make a New Year's resolution to get crude back in their sights.
Uncertainties due to terrorism, the weaker dollar, global economic growth, and Chinese demand likely will keep oil at current levels slightly above $40 a barrel or push it higher, analysts and traders said. So there is little chance of oil easing investor concerns by sagging back to the 2003 average of $31 a barrel, according to Wachovia Securities.
CONTINUING THE RALLY
"Oil prices are important to the continuation of this rally," said Paul Mendelsohn, chief investment strategist at Wyndham Financial Services. "If we get a tremendous surge in oil prices next year, then it will take us back to the position in the market before November when oil was over $50."
The Dow Jones industrial average slumped to its lowest level for the year on Oct. 25 when oil hit the $55.67 mark, its highest in the 21-year history of NYMEX trading. High oil prices curb corporate profits and consumer spending and often negatively impact stocks.
But the U.S. stock market has risen in six of the last eight weeks since the presidential election. And, in recent weeks, oil has not been on investors' radar screens with the market frequently trading higher in spite of a rise in oil prices and falling even as crude prices slipped.
Taken from the Sunday Gleaner, January 2, 2005
