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Falling Oil Prices Not Necessarily Good for Stocks
Posted Jul 08, 2008 03:39pm EDT by Aaron Task in Investing, CommoditiesOil prices have dropped $9 since reaching a record of near $146 a barrel last week. On Tuesday, the stock market responded to oil's drop (and Ben Bernanke's comments) as most people expect - with a sharp rally.
But even as he predicts a relief rally, Kevin Depew, executive editor of Minyanville.com says don't get overly excited about the oil-stock relationship. Falling oil prices are a barometer of weakening demand and a softening global economy. And that spells bad news for earnings -- and the energy-heavy S&P 500 index that includes Exxon, Chevron and Apache to name a few.
Meanwhile, oil investor Boone Pickens told CNBC today he sees near-term oil prices hovering around $150 a barrel, and possibly retreating to $100 in two years. Pickens also said the U.S. is "very close to a disaster" because we import nearly 70 percent of our oil. So while retreating oil prices are good news for consumers, the effects are more murky for earnings and equities.
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