Oil nearing $114 a barrel? No big deal on Wall Street

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Record oil prices seem to have lost their ability to shock Wall Street.

Crude futures closed at a new high today, at $113.79 a barrel. The price is up 13% just since March 24.

But the stock market ended mostly higher today, and the Standard & Poor’s 500 stock index is down a mere 1.1% since March 24.

Two things appear to be going on here. One is that stock investors, on the whole, refuse to buy into the idea that record oil prices will drive the economy into a deep recession.

There’s no question that consumers are being drained by soaring gasoline prices -- not to mention the added pain of serious food-price inflation. But the stock market tends to look ahead, and what it sees are those federal rebate checks coming to 130 million households beginning in May.

‘Wall Street is looking to those rebate checks to get us over the valley’ of energy’s drag on consumer spending, said Linda Duessel, market strategist at Federated Investment Management in Pittsburgh.

A second reason why the stock market isn’t losing much sleep over oil: There is widespread belief that it’s only a matter of time before the commodity mania runs its course.

‘The one reassuring thing is that it’s a bubble in commodities,’ says Diane Swonk, chief economist at Mesirow Financial in Chicago. ‘You just have to wait for it to burst.’

But we’ve all heard that one before -- like when oil was $60 a barrel, and $70, and $80 and $90. What if the surprise is that oil and other commodity prices don’t come down soon?

Already, ‘The consumer is getting clobbered in every which-way imaginable,’ says John Lonski, economist at Moody’s Investors Service in New York. He notes that the cost of the necessities of energy and food are rising sharply while the value of most people’s largest asset -- their home -- keeps sliding.

If $4-a-gallon gasoline becomes the national norm, he says, consumers ‘should definitely be in a lot of trouble.’

Americans’ spending has slowed markedly this year but it hasn’t collapsed. Given that consumer confidence is at its lowest level since 1982, according to the monthly Reuters/University of Michigan survey of households, you’d think the damage to retail sales would be a lot worse.

Or maybe that’s just tempting fate.