updated 9/22/2005 7:13:14 AM ET 2005-09-22T11:13:14

A hike in crude oil prices sent Wall Street’s main stock indexes down sharply Wednesday, as traders worried about the damage that Hurricane Rita might wreak on Texas refineries.

Major Market Indices

Stocks slumped after crude oil futures rose Wednesday , jumping as much as $2 a barrel in morning trading. While economists have debated the long-term economic impact of Hurricane Katrina, few have ventured to guess what a hit from another powerful hurricane might mean to long-term oil prices and the economy. Category 5 Rita is expected to make landfall, most likely in Texas, by the weekend. BP PLC began closing some of its refinery operations Wednesday.

“Hurricane Rita, and its corollary affect on energy prices, is moving the market today, no question about it,” said William Hummer, chief economist at Wayne Hummer Investments. “Uncertainty is poison for the market.”

With no significant new economic data released Wednesday, traders focused on Tuesday’s Federal Reserve interest rate hike, which is widely seen as a sign that the Fed is worried about inflation. In its policy notes, the Fed described inflation expectations as “contained’ instead of “well-contained.”

“It makes me think that the economic risk is more stagflationary than it has been,” said Brian Gendreau, investment strategist at ING Investment Management.

Trading was heavy. The Dow Jones industrial average finished the day down 103.49 points, or 1 percent, closing at the day’s lows, while the broader Standard & Poor’s 500-stock index fell 11.14 points, or 0.9 percent. The Nasdaq composite index lost 24.69 points, or 1.2 percent.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.17 percent from 4.25 percent late Tuesday. The U.S. dollar fell against other major world currencies in European trading.

In company news, insurer American International Group Inc. fell $1.11 to $59.40 after it said late Tuesday it expects $1.1 billion in after-tax losses for the third quarter, mainly because of claims from Hurricane Katrina.

The New York Times Co. fell $2.13 to $30 after the newspaper company said late Tuesday its third-quarter earnings would miss estimates by a wide margin and the company would cut 500 jobs.

Shipping company FedEx Corp. rose $6.15 to $83.15 after it said its first-quarter profit rose modestly , weighed down by an accounting charge, while revenue showed solid growth as daily package volume expanded. Setting aside a one-time charge from changing its lease accounting, earnings would have been $1.25 per share, well above analysts’ estimates.

Morgan Stanley fell 65 cents to $51.75 after the financial company said its profit dropped 83 percent in the third quarter, including a $1 billion charge to write off the value of its aircraft financing business. Without the charge, Morgan Stanley’s pretax income beat analysts’ estimates.

Overseas, Japan’s Nikkei stock average rose 0.37 percent. In Europe, Britain’s FTSE 100 fell 0.86 percent, Germany’s DAX index lost 1.77 percent and France’s CAC-40 fell 1.41 percent.

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

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