As crude oil climbed to a record $129 per barrel close on Tuesday on the New York Mercantile Exchange and wholesale inflation outside
of the usual oil and food suspects jumped 0.4% in April, doubling
analyst expectations, Deal Stocks and the broader markets
were sent tumbling. The Dow Jones Industrial Average sunk 189.30 points to close
at 12,828.68.
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Airlines Deal Stocks were particularly hard hit with
pending merger partners UAL Corp. and US Airways Group Inc. dropping
6.92% to $11.56 and 6.02% to $6.87, respectively. If rising oil prices
is not enough to contend with, the deal has also faced labor group
obstacles. On April 29, United pilot leader Steve Wallach warned that
labor issues inside US Airways has created a "toxic stew" that would
poison any deal and vowed to fight a merger. On May 16 US Airways
pilots also came out against the merger, saying in a statement that the group "will not sit back and allow
airline environmental changes without protecting the interests of all
our pilots."
American International Group Inc. also took a hit, falling 2.13% to close at $38.12 per share on Tuesday
following a Wall Street Journal report that the insurance company intends to sell off some noncore businesses
to raise cash and reinvest in high-growth businesses. This follows
AIG's $20 billion raise from common stock, convertible and hybrid
securities last week. - Michael Rudnick
