Oil slips below $35 as global markets slump

HOUSTON -- A new batch of lousy economic news dragged oil prices down nearly 7% Tuesday, as signs from across the globe pointed to a prolonged and painful recession.

Light, sweet crude for March delivery fell $2.58 to settle at $34.93 a barrel on the New York Mercantile Exchange.

A number of other commodities fell hard too as people sought less volatile investments.

"The recession is getting worse in their eyes," said Phil Flynn, an analyst at Alaron Trading. "We've gone from a year when we didn't think we were going to have enough of any commodity to a situation where we're going to end the year with oversupply."

Energy analysts at Raymond James & Associates said broader market concerns are depressing crude prices, even as President Barack Obama on Tuesday signed the $787 billion stimulus package into law.

"The market doesn't seem to think that this plan is going to solve the economic problems in the short term," Raymond James said in a note to clients Tuesday.

Stocks took a nosedive in trading Tuesday, as Wall Street reacted to unsettling news from the automotive and retail fronts, as well as slumping markets from Asia to Europe.

General Motors and Chrysler were racing to finish restructuring plans to present to the federal government Tuesday. The plans are supposed to outline how the automakers intend to again become viable and repay billions of dollars of government loans.

Wal-Mart Stores said Tuesday its fourth-quarter profit fell 7.4%. While results adjusted to account for a labor settlement beat Wall Street forecasts, the world's largest retailer said it might fall short of expectations for the first quarter of this year.

And new data from the Federal Reserve Bank of New York showed weakening manufacturing in the state. The Empire State Manufacturing Survey hit a new low of negative 34.7. Economists polled by Thomson Reuters were projecting a reading of negative 22.2.

The report is the earliest of several monthly regional snapshots that investors look to for insights on manufacturing.