Major stock indexes rallied into the close Monday, finishing higher as oil prices pulled back on profit-taking and as Hurricane Katrina was downgraded to a Level 2 storm. Damage to oil operations in the Gulf of Mexico was less than many anticipated, says Standard & Poor's MarketScope, putting a damper on the surge in energy prices.
The Dow Jones industrial average finished up 65.76 points, or 0.63%, to 10,463.05. The broader Standard & Poor's 500 index gained 7.18 points, or 0.60%, to 1,212.28. The tech-heavy Nasdaq composite was up 16.88 points, or 0.80%, moving to 2,137.65.
It's the second time in recent months that stocks have showed resilience in the face of disaster. "I think the market is looking for any excuse to work its way higher," says Sam Stovall, chief investment strategist for Standard & Poor's. "We saw that after the London bombings [as well]...I think we could end up seeing a rotation toward growth in the second half of this year."
Earlier in the session, crude oil prices spiked as Hurricane Katrina hit shore. After the hurricane was downgraded to a Level 2 storm, modest profit-taking took hold. Oil settled up $1.07 to $67.20 per barrel, after being up more than $3 earlier in the session. Meanwhile, gasoline futures settled sharply higher, up by roughly 15%.
There were no major economic reports Monday. Up ahead in economic news this week, the preliminary second-quarter GDP figure will be reported Wednesday, followed on Thursday by the release of figures on personal income for July and the ISM manufacturing index for August. The employment report for August is due out Friday.
Oil stocks including Exxon Mobil (XOM) were higher, as market players bet that higher oil prices resulting from the hurricane would outweigh the costs associated with disrupted production and damage to oil rigs.
Insurance companies, such as Allstate (ALL) and American International Group (AIG), were trading lower as investors feared that damages from Hurricane Katrina could wipe out any third-quarter earnings. Later in the day the stocks came off of session lows, as it appeared that hurricane damage would not be as serious as originally feared.
Later in the week, earnings reports are expected from from jeweler Tiffany (TIF) on Wednesday and tax preparation group H&R Block (HRB) on Thursday.
Treasury yields headed lower as Hurricane Katrina hit land, and traders looked for a safety bid. Yields firmed up as the hurricane grew weaker, but still traded lower. The yield on the benchmark 10-year note finished at 4.17%.
European stock markets finished higher. London's Financial Times-Stock Exchange 100 index is closed for a national holiday.
Germany's DAX index closed up 28.44 points, or 0.59%, to 4,812.24, after the consumer cofidence figure rose to 3.4 from a revised 3.2 last month, marking the first increase in five months. Gains were held in place by higher oil prices however, as German traders kept an eye on Hurricane Katrina.
In Paris, the CAC 40 index rose by 18.57 points, or 0.43%, to 4,361.27. General de Sante shares were lower after the company announced that it would sell properties worth 300 million euros next year.
Asian markets finished sharply lower on Monday . Japan's Nikkei 225 index fell 129.65 points, or 1.04%, to 12,309.83. The decline, the biggest drop in two months, was led by exporters including Honda Motor, Toyota Motor, and Canon.
In Hong Kong, the Hang Seng index lost 145.92 points, or 0.97%, to 14,836.97. Top laggards included China Unicorn, Li & Fung, and China Mobile.