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Stock Market High, Dropping Gas Prices Signal Possible Economic Boom

Dropping gas prices and a peaking stock market have created hopes for an economic turnaround, yet housing sales continue to fall. Financial experts decode the mixed economic signals.

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    And finally tonight, our economic update.

    In recent weeks, gas prices have dropped like a stone. The stock market is approaching a record, yet sales of existing homes are sinking. What to make of this mix of good and bad economic news?

    Here to help us out, Mark Zandi, chief economist at MoodysEconomy.com; and John Kilduff, senior vice president for energy risk management at Fimat USA, a global financial services company.

    John Kilduff, gas prices have dropped by 50 cents in the last month. Why?


    We got through the summer in a big way. The fears over Iran, the fears over the hurricane season, and the fears over the government's implementation of ethanol as an additive for clean air rules throughout the country all passed without our worst fears being realized. As a result, the market, the marketplace has basically exhaled and said, "We have enough supply. Prices, come down."


    If you had to balance the domestic concerns, which you talked about, weather and other concerns, against the geopolitical concerns, about what was going to happen with the oil supply in the Middle East, for instance — Venezuela, other places — what would you say had the greater impact?


    Well, certainly, the strong U.S. consumer demand for gasoline that was unrelenting, despite the $3 price mark, fed into the whole situation. But I think the greatest fears, the culmination of the $80 crude oil or the $78 crude oil, was the Hezbollah situation with Iran as a central player, not only as a backer of the Hezbollah, but also over their nuclear ambitions.

    We had President Bush saying that the matter over Iran's nuclear ambitions would be resolved in a matter of weeks, not months, so it looked as though a showdown was imminent. And when it comes to oil and gasoline prices, when you're talking about Iran, the stakes are just huge, and that's why traders run for cover, and buy up, and push up the price.

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