Gasoline Rally Seen Fueling U.S. Stock Losses: Chart of the Day

Gasoline prices have risen high enough to hurt stocks if history is any guide, according to Barry Knapp, head of U.S. equity strategy at Barclays Plc’s securities unit.

The CHART OF THE DAY tracks the relationship between the average retail price of unleaded gas and the ratio of price to estimated earnings for the Standard & Poor’s 500 Index. Knapp included a similar chart in a note to clients yesterday.

Gas prices rose every day from Jan. 17 through Feb. 20, according to data from the American Automobile Association. The five-week rally lifted the average pump price nationwide by about 15 percent to $3.778 a gallon, the highest since October.

Stocks fell after unleaded gas peaked in May 2011 and in April and September of last year, as the chart shows. The first two declines coincided with slower growth in consumer spending, according to quarterly data from the Commerce Department.

The latest gas-price increase has helped to put stocks “in a precarious position,” Knapp wrote. Consumers’ cash flow and sentiment are poised to worsen, the New York-based strategist wrote, and their expenditures may soon follow.

Any slowing of economic growth that stems from higher gas prices may prevent companies from meeting earnings projections, the report said. Sustained expansion, on the other hand, would increase the risk of inflation and put pressure on the Federal Reserve to scale back bond purchases that have helped bolster stocks, Knapp wrote.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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