Soaring oil prices are taking their toll on U.S. stocks

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From Times staff writer Walter Hamilton:

The stock market’s winning streak is about to be snapped.

Barring a dramatic late-day turnaround, the market’s string of three straight weekly rallies will end today, done in primarily by soaring crude oil prices.

As of 10 a.m. PDT, the Dow Jones industrial average was off more than 100 points. For the week, the Dow is down more than 300 points, or about 2.3%.

Today’s main culprit is American International Group, which is down 8% after reporting a quarterly loss of $7.8 billion after markets closed Thursday.

But creeping fuel prices are clearly unnerving investors.

Crude prices have ballooned this week and hit a new intraday peak of more than $126-a-barrel this morning. Some of that gain appears to be driven by speculative trading activity that likely won’t last, but that doesn’t have stock buyers feeling any more sanguine.

The stock rally over the last few weeks was fed by generally good news, including better-than-expected jobless and earnings numbers, as well as the sense that the global financial crisis was nearing its latter stages.

But the tone has shifted this week as investors wait to see how far oil will rise and how that will affect the economy.

“The big fly in the ointment has been oil,” said Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati. “No one thought a year ago that oil at $60-a-barrel would double. That’s the main factor as to why this market may lose some steam in the near term.”

Money & Co. blogger Tom Petruno is on vacation this week. He returns May 12.