Stocks tumbled Tuesday in the devastating aftermath of Hurricane Katrina, which slammed the Gulf Coast, pounded hotels and casinos, constricting oil refinery capacity and leaving insurers to cover losses estimated as high as $26 billion.
While major indexes gained Monday when the storm weakened, Wall Street’s spirits sank Tuesday after the nation’s top disaster relief official called the hurricane “catastrophic” and stocks in affected sectors continued to drop, with insurers and gaming companies hit especially hard.
“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 briefly rose past $70 a barrel in morning trading with fears that already tight refinery capacity would be further constrained, since at least eight Gulf Coast refineries in the hurricane’s path shut down or reduced operations. The Coast Guard said seven rigs are adrift in the Gulf of Mexico.
Notes released from the Federal Reserve’s last policy maker meeting further aggravated Wall Street. The notes signaled 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.”
The Dow Jones industrial average finished the day down 50.23 points, or 0.5 percent, while the broader Standard & Poor’s 500-stock index fell 3.87 points, or 0.3 percent. The Nasdaq composite index fell 7.89 points, or 0.4 percent.
Bonds soared after the Federal Reserve notes were released, 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. 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.”
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.
The already troubled airline sector, which has been buffeted by labor troubles, pension costs and high oil prices, drooped. AMR Corp. fell 71 cents to $12.69; Northwest Airlines Corp. fell 25 cents to $4.82 and Delta Air Lines fell 7 cents to $1.20.
Oil companies continued to trade higher. Chevron Corp. rose $1.03 to $60.54; ConocoPhillips rose $1.34 to $64.41. Valero Energy Corp. rose $4.91 to $96.79 after shareholders of Premcor Inc., one of the nation’s largest independent refiners, apparently agreed to be purchased by Valero. Premcor fell $8.32 to $73.29 before shares were delayed until the final merger vote can be tallied.
Some gaming stocks fell again as casino operators assessed the damage to their Gulf Coast properties, which included reports of some casinos being swamped with water to the third floor. Pinnacle Entertainment Inc. fell 72 cents to $21.35. Isle of Capri Casinos Inc. fell 65 cents to $22.87.
Wal-Mart Stores Inc. fell 46 cents to $45.19 after it said 123 of its 3,725 stores were closed by the hurricane. Investors also feared higher gasoline prices could curtail shoppers’ spending.
Other retail stocks slid. The International Council of Shopping Centers said Tuesday that sales decreased for the fourth straight week. Retailers are reporting August sales on Friday and the market is not optimistic.
In company news, labor leaders say Boeing Co. and the Machinists union remain far apart just days before the Machinists’ contract is to expire on Friday. Boeing fell 84 cents to $66.74 after labor leaders warned of a possible strike at the Chicago plane manufacturer. Boeing submitted a revised offer to the union late Monday that increases payments to workers but that union leaders said did not do enough to address key issues.
Abercrombie & Fitch Co. fell $3.93 to $53.80 after it said President and Chief Operating Officer Robert S. Singer is leaving after only 15 months on the job, due to a difference in approach over the teen retailer’s plans for international expansion. The company reaffirmed its guidance for full-year income between $3.10 and $3.30 per share on projected sales of about $2.7 billion, including a one-time charge recorded in the third quarter related to Singer’s severance package.
Ford Motor Co. fell 2 cents to $9.75 after the company said it plans to fire 400 U.S. salaried employees by the end of this year as part of a restructuring plan, the first time in 30 years that Ford has forced out so many white-collar workers.
Overseas, Japan’s Nikkei stock average gained 1.16 percent. In Europe, Britain’s FTSE 100 rose 0.53 percent, Germany’s DAX index fell 0.43 percent and France’s CAC-40 was down 0.11 percent.