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Wall Street Jitters, Fuel Costs Spread Economic Woes

The Dow Jones dropped Thursday to its lowest point since September 2006, due to economic woes and soaring oil prices across the country. A chief investment officer examines the impact of the bleak news on the national economy.

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    The bleak news came on two fronts. A big drop on Wall Street brought the Dow to its lowest point since September 2006, and a sharp rise in oil prices, moving into record territory yet again.

    For a look at what's going on, we turn to Hugh Johnson, chief investment officer for First Albany Corporation.

    Well, Mr. Johnson, it's been a terrible few weeks on the market. Was there something special driving it further down today?

    HUGH JOHNSON, chief investment officer, Johnson Illington Advisors: I don't think there's anything special, Jeff. I think it's really more of the same. As investors, we're really reminded of the fact that there are significant risks or real problems for the U.S. economy.

    We started the day, when Goldman Sachs, which is a highly regarded investment firm, said that Citigroup, Merrill Lynch have some substantial write-offs ahead. In other words, bad credit conditions are going to continue to plague big financial institutions and, therefore, their ability to land and drive the economy.

    Obviously, second, as you mentioned, the price of oil going up to a new record, that raises real problems, an oil tax for the economy, which is going to be extraordinarily difficult for the economy to absorb and continue to expand.

    And then yesterday, of course, the Federal Reserve told us that they're worried about inflation and they may raise interest rates.

    So there are these headwinds that are facing investors. One we could manage, but, quite frankly, collectively investors have said this is too much for the economy and earnings in the second half of this year. It's going to be tough for this economy to make any headway.