Wall Street rallied Monday after Hurricane Katrina weakened, easing concerns about refinery outages along the Gulf of Mexico and pulling oil prices back from record highs.
Stocks opened lower but quickly rebounded as crude oil futures cooled after surging past $70 a barrel in early trading on news that the storm shut down about 8% of U.S. refining capacity. A barrel of light crude settled at $67.20, up $1.07, on the New York Mercantile Exchange.
Home Depot had the second-biggest advance in the Dow Jones industrial average as some investors bet on higher sales in the South in the wake of Katrina.
“There was doom and gloom, but the storm [largely] missed New Orleans and that helped,” said Warren Simpson, who helps manage $2.5 billion at Stephens Capital Management in Little Rock, Ark. Oil “came down and that spurred the market.”
The Dow average climbed 65.76 points, or 0.6%, to close at 10,463.05. On Friday, the Dow and other major indexes ended at their lowest levels in seven weeks.
Among broader indexes, the Standard & Poor’s 500 gained 7.18 points, or 0.6%, to 1,212.28, and the Nasdaq composite rose 16.88 points, or 0.8%, to 2,137.65.
Although declining issues outpaced advancers through most of the session, the market shifted in afternoon trading and finished with advancers leading decliners by 5 to 3 on the New York Stock Exchange. Volume, however, remained muted.
Bond yields were little changed, with the benchmark 10-year Treasury note easing to 4.17% from 4.18% on Friday.
Among shorter-term bonds, yields continued to draw close together in a so-called flattening of the yield curve. The five-year T-note yield ended at 4.07%, barely more than the 4.05% paid on two-year T-notes.
A flattening of the yield curve often occurs as investors begin to bet that the economy will slow, eventually leading to declining long-term interest rates.
The dollar was mixed against other major currencies in European trading, while gold prices slipped.
Much of Wall Street’s advance came late in the day, when the hurricane diminished to a Category 1 storm and it was clear that Katrina had not delivered the heavy blow to Gulf oil and gas production that some had feared.
Still, the storm forced the Louisiana Offshore Oil Port, the nation’s largest import terminal, to evacuate workers and stop unloading ships over the weekend.
“Clearly it’s going to have some impact on the market if there is damage that will keep the port closed,” said John Caldwell, chief investment strategist for McDonald Financial Group.
Shares of oil field service companies, however, advanced on speculation business will pick up because of damage to pipelines and oil and gas production.
Schlumberger, the biggest oil field contractor by market value, added 96 cents to $83.04. Halliburton, the world’s largest oil field service contractor by sales, climbed 54 cents to $57.80. BJ Services, the No. 6 oil field service provider, rose $1.17 to $60.65.
“We’re going to see continued growth in demand for drilling activity and exploration activity,” said Edward Hemmelgarn, who oversees more than $600 million as president of Shaker Investments Inc. in Cleveland. “With prices up so high and profit so great now,” there will be increased spending.
Among other energy issues, Amerada Hess climbed $2.79 to $124.89. The No. 5 U.S. oil company said it had closed most of its operations in the Gulf of Mexico as the hurricane approached, affecting output of 47,000 barrels of oil equivalent.
In other market highlights:
* Home Depot added 73 cents, or 1.8%, to $40.54, on expectations it could see a sales boost in the South as rebuilding begins. Smaller rival Lowe’s rallied $1.42 to $64.60.
* Gaming companies with operations in Louisiana declined. Isle of Capri Casinos fell 66 cents to $23.52. The company’s two casinos in Louisiana accounted for 23% of revenue last quarter. Boyd Gaming, which operates casinos in Louisiana and Mississippi, slipped 20 cents to $47.59.
* Wood products companies gained as lumber prices surged on expectations of greater sales in storm-ravaged areas. Weyerhaeuser rose 45 cents to $64.19, Deltic Timber jumped $1.33 to $39.03 and Plum Creek Timber gained 62 cents to $35.38.
Near-term lumber futures in Chicago soared the daily limit of $10, or 3.6%, to $287.50 per 1,000 board feet. The price recently was near a two-year low.
* PanAmSat Holding surged $4 to $23.80. Intelsat agreed to buy PanAmSat for $3.2 billion in cash to form the top commercial satellite operator. Intelsat will pay $25 a share for the No. 1 distributor of satellite-based television channels, 26% more than its Friday closing price.
* Steel stocks rallied. Global demand and pricing for steel are set to rise beginning in the fourth quarter and continuing through 2006 as customers restock depleted inventories, said Morgan Stanley steel industry analyst Wayne Atwell in a note.
Shares of Nucor, the No. 2 U.S. steelmaker, advanced $1.97 to $55.64. Allegheny Technologies, another U.S. steel producer, climbed $1.15 to $27.73.
* Biotechnology stocks attracted interest as buyers stepped back into the market. Amgen jumped $1.41 to $80.09, Genentech surged $1.31 to $91.12 and Amylin Pharmaceuticals rallied $1.89 to $32.66.