Stocks skidded Tuesday as Hurricane Katrina sent oil prices to a record high and the Federal Reserve said fuel costs probably would make consumer goods more expensive.
Retailers and transportation shares led the market decline. The losses reflected concern that consumer spending would weaken and energy prices would climb further in the wake of Katrina, which damaged oil and gas rigs in the Gulf of Mexico.
In the Treasury bond market, yields sank as some investors bet on a decelerating economy.
Major stock indexes rallied Monday when the storm lost strength, but Wall Street’s spirits sank Tuesday after the nation’s top disaster relief official called the hurricane “catastrophic” and oil futures soared $2.61 to $69.81 a barrel in New York.
The Dow Jones industrial average was down more than 100 points in afternoon trading but narrowed its losses toward the close.
“The broad impact of this storm is going to be on energy prices and how that feeds through to the rest of industrial America and consumers,” said Edmund Cowart, who helps manage $11 billion at Eagle Asset Management.
The Dow closed down 50.23 points, or 0.5%, at 10,412.82.
Broader stock indexes also lost ground. The Standard & Poor’s 500 fell 3.87 points, or 0.3%, to 1,208.41, and the Nasdaq composite slid 7.89 points, or 0.4%, to 2,129.76.
Notes released from the Federal Reserve’s last policy meeting also factored into stocks’ losses and helped pull bond yields down. The yield on the benchmark 10-year Treasury note fell to 4.09% from 4.17% on Monday. The two-year T-note dropped to 3.95% from 4.05%.
The minutes showed policymakers expected fuel prices to possibly curb consumer spending, which accounts for two-thirds of the economy. A weaker economy could mean downward pressure on longer-term interest rates.
“Seventy-dollar oil is the point where you start to get a bit more nervous” about the economy, said Ed Keon, chief investment strategist at Prudential Equity Group.
In other market highlights:
* Insurance stocks sagged again as damage estimates varied widely. Allstate fell 54 cents to $56.64, American International Group lost 54 cents to $56.64 and Ace slipped 32 cents to $44.19.
* Transportation stocks were hit by higher oil prices. Among airlines, AMR, parent of American, fell 71 cents to $12.69, Continental slumped 58 cents to $13.25 and JetBlue lost 23 cents to $18.87. Among railroads, Union Pacific lost 83 cents to $68.35 and Norfolk Southern retreated 58 cents to $35.63.
* Energy stocks resurged. Chevron rose $1.03 to $60.54 and ConocoPhillips added $1.34 to $64.41. Valero Energy soared $4.91 to $96.79 after shareholders of Premcor, an independent refiner, approved its sale to Valero.
* Wal-Mart Stores 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 also slid after the International Council of Shopping Centers said sales fell for the fourth straight week. Retailers will report August sales Thursday, and the market is not optimistic. J.C. Penney fell $1.82 to $48.66 and Target dropped $1.58 to $54.14.
Abercrombie & Fitch fell $3.93 to $53.80 after it said President Robert S. Singer was leaving after 15 months on the job.
* Some gaming stocks fell again as casino operators assessed the damage to their Gulf Coast properties. Pinnacle Entertainment fell 72 cents to $21.35 and Isle of Capri Casinos sank 65 cents to $22.87.