Hurricane hits US stocks

US stocks fell today 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 US$25bn (€20.47).

While major indexes gained on Monday when the storm weakened, Wall Street’s spirits sank today 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 further constrained as TV reports asserted 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 US$69.81 (€57.15), up US$2.61 (€2.14) a barrel on the New York Mercantile Exchange.

Minutes released from the Federal Reserve’s last policy maker meeting further aggravated equity investors. The minutes signalled that rate hikes 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 hikes “for now”.

Losses narrowed in late afternoon trading. The Dow Jones industrial average closed down 50.23, or 0.48%, at 10,412.82, after being off more than 100 points in earlier trading.

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