updated 9/1/2005 7:58:02 AM ET 2005-09-01T11:58:02

Stocks climbed in a seesaw session Wednesday, 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.

Major Market Indices

Stocks 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 hikes 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 Santomero’s comments.

Falling oil prices also helped stocks. After closing at a record high of $69.81 Tuesday, oil settled Wednesday at $68.94, down 32 cents on the New York Mercantile Exchange.

After wavering during the session, the Dow Jones industrial average closed up 68.78 points, or 0.7 percent, while the broader Standard & Poor’s 500-stock index saw a gain of 11.92 points, or 1 percent. The Nasdaq composite index added 22.33 points, or 1.1 percent.

Bonds soared, with the yield on the 10-year Treasury note dipping to 4.02 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.

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 intra-day trading Wednesday, 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.

Oil companies continued to trade higher. Exxon Mobil Corp. rose $1.29 to $59.90; Chevron Corp. rose 86 cents to $61.40 and ConocoPhillips rose $1.53 to $65.94.

Engineering and construction companies were the day’s darlings. Fluor Corp. rose $3.34 to $61.91; Jacobs Engineering Group Inc. rose $4.23 to $62.40; Washington Group International Inc. rose $3.02 to $52.84 and Foster Wheeler Ltd. rose $2.24 to $26.90. The Shaw Group Inc., an engineering and construction company based in Baton Rouge, La. that is already advertising for workers to help its rebuilding projects, rose $3.05 to $21.10.

Insurance stocks sagged for the third straight day. Hartford Financial Services Group fell 10 cents to $73.05 and Allstate Corp. fell 43 cents to $56.21.

The troubled airline sector continued to sag on predictions of higher fuel prices. AMR Corp. fell 10 cents to $12.59 and Delta Air Lines fell 4 cents to $1.16.

Boeing Co. rose 28 cents to $67.02 even after Machinists union leaders advised more than 18,000 workers to reject Boeing Co.’s final contract offer and strike . A top Boeing executive said a strike would be devastating to the company’s prospects. Union members vote on the three-year offer Thursday, with the current contract set to expire Friday.

Video: Energy shock Luxury retailer Tiffany & Co. rose $4.11 to $37.42 after its earnings climbed 53 percent in the second quarter due to higher sales and a lower tax rate, and the company boosted profit guidance for the full year. As a result of the American Jobs Creation Act of 2004, the effective tax rate was lower in the latest quarter than in the prior year, and boosted profit by 5 cents per share. The company also forecasts full-year sales growth of 8 percent to 10 percent.

Overseas, Japan’s Nikkei stock average fell 0.32 percent. In Europe, Britain’s FTSE 100 rose 0.78 percent, Germany’s DAX index was up 0.79 percent and France’s CAC-40 added 0.98 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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