Stocks Hold Their Own in the Wake of Katrina

Wall Street finished a volatile week with modest losses Friday as investors, restrained by uncertainty about the economic effect of Hurricane Katrina, had little reaction to a sharp decline in oil prices and lower unemployment.

Still, major market indexes were mostly higher for the five days as Treasury bond yields slumped, and as energy-related shares soared to record levels.

The market opened higher on news that the economy added a net 169,000 jobs in August, and that June and July job gains were revised upward. The data offset some other recent economic reports that suggested the expansion was slowing.

But the employment report was overshadowed by fears that Katrina’s devastation of the Gulf Coast could pull the economy down in coming months, if fuel prices remain elevated because of refinery outages.

The Dow Jones industrial average eased 12.26 points, or 0.1%, to 10,447.37, as losers outnumbered winners by a narrow margin on the New York Stock Exchange.

Among broader indexes, the Standard & Poor’s 500 lost 3.57 points, or 0.3%, to 1,218.02, and the Nasdaq composite gave up 6.83 points, or 0.3%, to 2,141.07.

Even so, “The market has held up remarkably well in the face of a lot of things that should have hit it harder,” said John O’Donoghue, head of trading at SG Cowen Securities Corp. in New York.

For the week the Dow rose 0.5%, the S&P; 500 gained 1.1% and the Nasdaq added 1%.

Despite worries about the hurricane’s economic fallout, the stock market was supported during the week by a sharp drop in Treasury yields as many bond investors bet that the Federal Reserve would temporarily halt its credit-tightening campaign because of Katrina.

Yields were little changed on Friday, but their declines for the week were dramatic: The two-year T-note, which ended at 3.75%, was down from 4.06% a week earlier, and now is near an eight-week low.

The 10-year T-note was at 4.03% Friday, down from 4.18% a week earlier.

Investors are “starting to think the Fed might be done” raising rates, said David Glocke, a principal at mutual fund giant Vanguard Group. But many economists say it’s too early to make that call. Fed policymakers next meet on Sept. 20.

Oil prices retreated Friday as the U.S. and its allies stepped up efforts to increase crude and gasoline supplies, including by tapping strategic reserves. Near-term crude futures in New York dropped $1.90 to $67.57 a barrel. The record closing high of $69.81 was set on Tuesday. Gasoline futures prices also plunged.

The dollar continued to slide. The euro rose to a three-month high of $1.254, up from $1.249 Thursday.

On Wall Street, energy-related stocks pulled back after soaring most of the week. Marathon Oil dropped $1.75 to $65.07, Sunoco lost $2.79 to $75.25, Apache fell $1.09 to $70.43 and Todco was off $1.41 to $33.95.

Many insurance stocks continued to slide on worries about the ultimate cost of Katrina. Allstate fell 26 cents to $55.53, and lost 4.7% for the week. St. Paul Travelers rebounded 23 cents to $42.44, but was down 5.1% for the week.

Some investors continued to hunt for stocks of companies that might benefit from a Gulf Coast rebuilding boom. Winners on Friday included earthmoving-equipment maker Caterpillar, up $1.31 to $58.25; cement maker Ready Mix, up 82 cents to $14.77; and modular classroom manufacturer Modtech, up 95 cents to $10.60.