- The Washington Times - Tuesday, August 30, 2005

NEW YORK (AP) — Stocks skidded yesterday in the devastating aftermath of Hurricane Katrina, which slammed the Gulf Coast, pounding hotels and casinos, constricting oil refinery capacity and leaving insurers to cover losses estimated as high as $25 billion.

Although major indexes gained Monday when the storm weakened, Wall Street’s spirits sank yesterday after the nation’s top disaster relief official called the hurricane “catastrophic,” oil prices climbed and stocks in affected sectors continued to drop.

“This is the kind of reaction everyone expected yesterday,” said John Caldwell, chief investment strategist for McDonald Financial Group, part of Cleveland-based KeyCorp.

Crude oil futures hit record highs on fears that already tight refinery capacity would be constrained further as TV reports noted widespread refinery shutdowns along the Gulf Coast and the Coast Guard said seven rigs are adrift in the Gulf of Mexico. A barrel of light crude settled at $69.81, up $2.61 a barrel on the New York Mercantile Exchange.

Notes released from the Federal Reserve’s last policy-maker meeting further aggravated equity investors. The notes signaled that rate increases could continue into 2006 and said inflation had “ticked up” since the policy-makers’ previous meeting but indicated they decided not to accelerate the pace of short-term interest rate increases “for now.”

The Dow closed down 50.23, or 0.48 percent, at 10,412.82.

Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 3.87, or 0.32 percent, to 1,208.41, and the Nasdaq Composite Index fell 7.89, or 0.37 percent, to 2,129.76.

The U.S. dollar was mixed against other major currencies in European trading. Gold prices were lower.

Bonds soared on higher oil prices, the Fed’s notes and stocks’ decline, with the yield on the 10-year Treasury note down to 4.10 percent from 4.17 percent late Monday.

New Orleans is an important coffee port; coffee prices were sharply higher on commodities markets. Prices for other commodities, including cotton and soybeans, also rose as the storm headed toward farmers in the Ohio Valley.

Natural gas prices climbed as companies with a Gulf Coast presence said they had either shut down or cut back operations there and disruptions could continue through tomorrow. The increases in energy costs and commodity prices sparked inflation fears.

“Seventy-dollar oil is the point where you start to get a bit more nervous,” said Ed Keon, chief investment strategist with Prudential Equity Group in New York. He said oil and refinery companies were likely to “invest like crazy” to increase supply, while consumers and companies started using less energy to reduce demand.

“My guess is eventually we’ll see prices start to come down again, but I don’t know that anyone knows when we’ll see that happen,” he said.

Insurance stocks sagged again as damage estimates varied widely. Hartford Financial Services Group fell 19 cents to $73.15, Allstate Corp. fell 54 cents to $56.64 and MetLife Inc. fell 43 cents to $48.69.

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