Rita’s Slowing Heartens Investors
The stock market managed to finish mostly higher Friday, capping off the week with some optimism amid hopes that Hurricane Rita’s effect on Gulf Coast refineries wouldn’t be as bad as initially feared.
With Rita headed for the Texas coastline -- the heart of U.S. energy production -- investors had braced for a repeat of the devastation caused by Hurricane Katrina last month. By Friday afternoon, however, Rita weakened two notches to a Category 3 hurricane, sending oil prices down $2.31 to $64.91 a barrel in New York and easing the mood on Wall Street.
Natural gas and gasoline futures also fell.
Stock trading volume slid as traders kept an eye on the storm, projected to strike the Texas-Louisiana border early today.
More stocks rose than fell on the New York Stock Exchange and on Nasdaq, but major indexes were mixed. The Dow Jones industrial average posted a small loss, off 2.46 points to 10,419.59.
“I think whenever you have something that’s an event that could create news over the weekend, people get a little more cautious about putting money on the table,” said Susan Malley, chief investment officer for Malley Associates Capital Management.
The market also mulled over a profit warning from Alcoa and discouraging earnings reports from technology firms Oracle and Palm, an early glimpse of the third-quarter earnings-reporting season.
Among broader indexes, the Standard & Poor’s 500 edged up 0.67 point, or less than 0.1%, to 1,215.29, and the Nasdaq composite gained 6.06 points, or 0.3%, to 2,116.84.
Treasury bond yields rose on expectations that Rita might not be as destructive to Gulf Coast oil rigs, pipelines and refineries as initially feared, easing concerns that surging energy costs would slow the economy.
The 10-year U.S. Treasury note rose to 4.25% from 4.18% on Thursday. It was at 4.27% a week ago. The two-year T-note ended at 4.01%, up from 3.94% on Thursday and the first close above 4% since Aug. 29.
Earlier in the week, crude oil had surged past $68 a barrel amid concerns about Rita’s potential to further ravage Gulf Coast energy production. Stocks plunged as oil prices rose.
The Dow posted three straight days of hefty losses, giving up more than 250 points through Wednesday.
For the week, the Dow lost 2.1%, the S&P; declined 1.8% and Nasdaq ended 2% lower.
With one week to go in the third quarter, the Dow is down 3.4% year to date, the S&P; is up 0.3% and Nasdaq is off 2.7%.
Among Friday’s market highlights:
* A measure of insurance stocks rallied 1% after the National Hurricane Center downgraded the threat from Rita. Reinsurance firm Everest Re surged $2.92 to $96.80 and Allstate jumped $2.59 to $54.53.
Insurers including Allstate cover an estimated $740 billion of property in Rita’s path, twice as much as in the three states pummeled by Katrina last month.
* The tech sector held its ground despite lackluster reports from Oracle and Palm late Thursday. Software maker Oracle said it squeezed out a slight rise in its fiscal first-quarter profit. But analysts were disappointed by the company’s database software sales, which rose just 2% last quarter. Oracle dropped $1.07 to $12.45.
Palm, maker of the Treo smart phone, said higher costs and slumping sales of digital organizers drove a 7% decline in quarterly earnings. The company also pegged its second-quarter profit well below Wall Street targets, citing strong overseas competition. Palm lost $6.28, or 18%, to $28.69.
* Alcoa also warned after the bell Thursday that its third-quarter earnings would miss analysts’ expectations, as soaring energy and raw-material costs exacerbate a revenue shortfall from sliding aluminum prices. Alcoa said its results would also be affected by Rita, which forced it to close several facilities in the storm’s path. Alcoa slumped $1.48 to $24.42.
* WellPoint and UnitedHealth Group advanced after winning U.S. contracts to offer prescription drug coverage to seniors. UnitedHealth, the second-biggest medical insurance company, climbed $1.37 to $55. WellPoint, the largest U.S. health insurance provider, rallied $1.55 to $74.74.
