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High Gas Prices Threaten Stock Market Gains: Report
CNBC.com | March 12, 2012 | 02:00 PM EDT

If history is any indication, the stock market could soon lose the resilience it has shown so far in the face of soaring oil and gasoline prices, says a new report from Morgan Stanley.

According to the report, which was authored by chief U.S. equity strategist Adam Parker and several other analysts, “the U.S. equity market typically goes down when there’s oil supply shock,” albeit “it usually takes several months for the negative effects to be realized.”

Oil prices have surged 16 percent in the last three months, mainly on supply concerns stemming from the renewed tensions with Iran. Brent crudeclosed near $126 a barrel last Friday.

Morgan Stanley analysts recommend investors be cautious in this environment, particularly when it comes to the energy, materials and industrials sectors.

Energy stocks tend to underperform during supply-fueled oil price spikes, and supply shocks are particularly bad for Exxon Mobil , which comprises 29 percent of the S&P 500 energy sector.

“Our judgment is to be cautious of owning big overweights in these sectors,” says the report.

Morgan Stanley analysts expect the recent rise in oil prices to continue to impact prices at the pump, and that in turn will have a negative impact on stocks.

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