SanDisk’s news flash: Oil prices are a drag on consumers

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Have record oil prices finally gotten the stock market’s goat?

A heady early advance on Wall Street today evaporated late in the session as technology stocks suddenly fell off a cliff. And one catalyst -- or excuse -- for the tech sell-off was a plunge in shares of flash-memory card maker SanDisk Corp. after its chief executive, Eli Harari, told analysts that consumer electronics sales were ‘soft’ in April and he raised concerns about the effect of high energy prices on consumers.

Record oil and gasoline prices amount to ‘a very substantial tax on most consumers and the discretionary-spending impact of that should not be underestimated,’ Harari said at a conference in New York.

That shouldn’t qualify as a revelation, but shares of Milpitas, Calif.-based SanDisk, whose memory cards are used in digital cameras and cell phones, quickly fell from $31.94 just before Harari’s comments to $29.50, and closed at $30.02, for a drop of 7.5% on the day.

The Nasdaq composite index, which had been up 0.9% before Harari spoke, ended with a loss of 12.76 points, or 0.5%, at 2,516.09. The rest of the market also went south in a hurry, although blue-chip indexes still closed modestly higher. The Dow Jones transportation stock index reached a record high intraday before pulling back. (More on the transports’ wild run here.)

It didn’t help the mood that near-term crude oil futures finished above $127 a barrel for the first time, adding 76 cents to a record $127.05.

Stocks have been showing amazing resilience in the face of the latest surge in oil, as I wrote in this column on Saturday. But everyone has wondered what oil price would finally prove too much.

‘The stock market has been going up in spite of the oil rally, but apparently it needed someone to point out the harm this was doing to companies that you normally don’t associate with oil problems,’ said Steve Todd, editor of the Todd Market Forecast, referring to SanDisk’s Harari.

Many Wall Street pros have been warning for weeks that the stock market needed a timeout. SanDisk seems an unlikely candidate to trigger a broad market pullback, but for investors who’ve been itching to take profits Harari may have provided as good an excuse as any.