A rise in oil prices sent stocks sharply lower yesterday as traders worried about the damage that Hurricane Rita might wreak on Texas refineries...
NEW YORK — A rise in oil prices sent stocks sharply lower yesterday as traders worried about the damage that Hurricane Rita might wreak on Texas refineries. The Dow Jones industrial average lost more than 100 points.
The Dow fell 103.49 to 10,378.03. Over the past three sessions, the Dow has fallen 263.91, or 2.48 percent.
Microsoft, one of the 30 Dow stocks, fell 35 cents to close at $25.49 a share. Boeing, also a Dow stock, sank $1.04 to $62.41.
Trading was heavy. Broader stock indicators also fell sharply. The Standard & Poor’s 500 index fell 11.14 to 1,210.20, and the Nasdaq composite index fell 24.69 to 2,106.64.
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Stocks slid after oil futures rose as much as $2 a barrel in morning trading. While economists have debated the long-term economic impact of Hurricane Katrina, few have ventured to guess what a hit from another powerful hurricane might mean to long-term oil prices and the economy. Category 5 Rita is expected to make landfall by the weekend.
BP began closing some of its refinery operations yesterday. A barrel of light crude was quoted at $66.80, up 60 cents, in trading on the New York Mercantile Exchange.
“Hurricane Rita, and its corollary effect on energy prices, is moving the market today, no question about it,” said William Hummer, chief economist at Wayne Hummer Investments. “Uncertainty is poison for the market.”
With no significant new economic data released yesterday, traders focused on Tuesday’s Federal Reserve interest-rate increase, which is widely seen as a sign that the Fed is worried about inflation. In its policy statement, the Fed described inflation expectations as “contained’ instead of “well-contained.”
“It makes me think that the economic risk is more stagflationary than it has been,” said Brian Gendreau, investment strategist at ING Investment Management.
The market had been split on whether the Fed would pause its rate increases in the wake of Hurricane Katrina, but now that it’s set a course for a continuation of the rate increases, some investors are beginning to become more concerned about inflation themselves.
Government data emphasize the “core” rate of inflation. But with higher oil prices seemingly here to stay, some on Wall Street are saying that inflation is higher than the government wants to acknowledge.
FedEx rose $6.15 to $83.15 after it said first-quarter profit rose modestly, weighed down by an accounting charge, while revenue showed growth as daily package volume expanded. Setting aside a one-time charge from changing its lease accounting, earnings would have been $1.25 per share, well above estimates.