The dollar Tuesday slumped to another record low against the European Union euro and oil soared nearly three percent to a new record. But despite the bad news, VOA's Barry Wood reports the stock market is on the rise.
Oil spiked to just under $97 a barrel, a rise of nearly $3 on the day. The oil price is up nearly 20 percent in the past two months. At the same time, the dollar fell to record levels against the euro, the currency used by 13 European Union nations. One euro now costs over $1.45.
Gold, whose price tends rise when the dollar declines, continues to climb, reaching over $825 an ounce, its highest level in 27 years.
Despite these developments, US stock prices rallied on Tuesday, their best showing in nearly a week. The Dow Jones Industrials gained nearly one percent to 13,661, a gain of 117 points on the day.
Mark Vitner, chief economist at Wachovia Bank in Charlotte, North Carolina, says in his part of the country gasoline prices have not risen nearly as much as the price of oil. He says in the southeast United States consumer spending is holding up fine. Nationally, he expects a moderate to strong Christmas buying season over the next six weeks.
"We're likely to see that retail sales are going to rise somewhere between four and a half and five percent [over last year]," said Mark Vitner. "And the reason it is only going to increase that much is that higher gasoline prices and higher heating costs are eating into purchasing power. And there is really no escaping that. And, the turmoil in the housing market is taking a toll as well."
Nationwide, housing prices have fallen about five percent over the past year and many experts say they will drop much further. But in Muncie, Indiana, in the upper Midwest, the housing market remains steady, according to Ray Montagno, the associate dean at the School of Business at Ball State University.
"Our housing prices never experienced the big spikes of the rest of the country," said Ray Montagno. "I think our housing prices are relatively modest. They've remained sort of stable. We haven't had any drops in housing prices. And for the most part consumer behavior has been pretty constant throughout the state [of Indiana]."
Montagno says consumer sentiment in Indiana remains relatively high. He expects the region to cope with higher gasoline prices. Other experts say if gasoline prices rise by as much as 10 to 20 percent in the next weeks, that is bound to depress consumer spending during the runup to Christmas.