- The Washington Times - Wednesday, August 31, 2005

NEW YORK (AP) — Stocks climbed in a seesaw session yesterday, rising after the president of the Philadelphia Federal Reserve signaled the central bank could change its interest-rate policy in the aftermath of Hurricane Katrina.

Wall Street moved higher after Philadelphia Fed President Anthony Santomero called increasing oil prices a “tax” and told CNBC it was too early to say whether the Fed would change its interest-rate policy in light of the hurricane’s wreckage. Many traders took the comment as a signal that the Fed’s year-plus streak of rate increases might end sooner than expected.

“The president of the Philly Fed is saying the Fed has to adapt to changing circumstances,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “With what’s going on in New Orleans, I don’t think the Fed can raise rates.”

Bonds, which had soared all day, rose even higher after Mr. Santomero’s comments.

Falling oil prices also helped stocks. After closing at a record high of $69.81 Tuesday, oil settled yesterday at $68.94, down 87 cents on the New York Mercantile Exchange.

The Dow Jones Industrial Average rose 68.78, or 0.66 percent, to 10,481.60.

Broader stock indicators were sharply higher. The Standard & Poor’s 500 Index rose 11.92, or 0.99 percent, to 1,220.33, and the Nasdaq Composite Index rose 22.33, or 1.05 percent, to 2,152.09.

Bonds soared, with the yield on the 10-year Treasury note dipping to 4.01 percent from 4.10 percent late Tuesday. Ten-year notes had closed at 4.17 percent late Monday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were higher.

Oil prices swung wildly, at one point dropping more than $2 a barrel in trading on the NYMEX. Oil had climbed as high as $70.65 a barrel overnight before slipping after U.S. Energy Secretary Samuel W. Bodman’s morning announcement that the government would release oil from its petroleum reserves.

While the promise of borrowing from the nation’s petroleum reserves eased oil prices, gasoline prices, which depend on refinery capacity, soared. Refinery capacity was constrained before the hurricane, which has shut down eight Gulf Coast refineries. Gasoline futures surged 17.55 cents to $2.65 a gallon on the Nymex, which is 72 cents, or 35 percent higher, than Friday’s closing price. In intraday trading yesterday, gas neared $3 a gallon.

“Three dollars a gallon at the pump will have an effect on the consumer,” said Brian Williamson, an equity trader at the Boston Company Asset Management, a Mellon Financial Corp. subsidiary.

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