Stocks tried to mount an old-fashioned “relief rally” Monday, after Hurricane Rita proved less dangerous than feared, but then ran out of gas.
After dropping more than 200 points last week, the Dow Jones industrial average climbed 90 points early in Monday’s session. Then oil prices moved higher, and investors’ good cheer ebbed away. The Dow drooped into negative territory, then recovered a bit to end up a modest 24.04, closing at 10,443.63.
It was a day of “volatile trading that hinged on a broad swing in the price of oil,” said A.G. Edwards market strategist Alfred E. Goldman.
Early in the day, oil prices moved down, reflecting investors’ collective sigh of relief after it became clear that Rita hadn’t laid waste to the refineries and drilling rigs of Texas to the extent that Katrina socked Louisiana’s energy infrastructure.
Such cheerful sentiments helped send oil prices below $63 a barrel early on, but prices reversed course on news that some Texas refining operations may remain shuttered for longer than expected. Oil for November delivery ended the day up $1.63, at $65.82 a barrel.
The Standard & Poor’s 500 index mirrored the Dow’s swings, ending the day up 0.34 points, at 1215.63.
The technology-heavy Nasdaq composite index displayed slightly more pep, closing up 4.62, at 2121.46.
The National Association for Business Economics, holding its annual meeting in Chicago, said Monday that a survey of 43 economic forecasters suggested Hurricane Katrina is likely to have a “relatively modest and short-lived negative impact on the national economy.” The NABE forecasters did boost their projections for inflation in 2005, however.
And in comments following a Monday address to the economist convention, Chicago Fed President Michael Moskow again struck a hawkish anti-inflation note, saying “the fundamentals of the economy are strong.”
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Moskow’s comments helped convince bond traders that the Fed intends to continue raising interest rates to suppress inflationary pressures, and the benchmark 10-year Treasury bond moved lower Monday.
On Tuesday, Fed Chairman Alan Greenspan is slated to address the NABE meeting via satellite on the topic of economic flexibility.
High Frequency Economist Ian Shepherdson said because the talk will include a question-and-answer session, and because “Mr. Greenspan is the only one whose views really count for the markets,” investors should be “prepared for headlines to hit the [financial] wires for most of the afternoon.”
Upbeat outlook: While Wall Street nursed its jitters over the twin questions of inflation and consumer spending, Citigroup issued an upbeat statement saying its “target” close for the 2005 year-end Dow Jones industrials is 11,050, and that the Dow could close 2006 at 11,900.
“While many investors remain focused on energy prices, Fed policy, hurricane-related rebuild expenditures and earnings trends,” Citigroup said, “strong corporate cash levels and balance sheets, expected low inflation and a strong economy point to a favorable backdrop for stocks” in 2006.
“We think that equity market downside risk is limited,” Citigroup said, “barring exogenous shocks.”
Power of the pen: Shares of four heavy manufacturers dropped Monday, after Citigroup analyst David Raso, citing higher raw-material costs, reduced his ratings and trimmed earnings forecasts.
Downgrades to a “sell” rating pushed diesel engine-maker Cummins down 2.5 percent and caused Lake Forest-based farm equipment-maker CNH to tumble 3.9 percent.
After being marked down to “hold” from “buy,” Dow component Caterpillar closed off 1 percent, and Ingersoll-Rand declined 2.9 percent.
Local stocks: Abbott Laboratories shares dropped $1.56, or 3.5 percent, to $42.66 Monday on heavy volume.
Investors were reacting to news released late Friday that Abbott had lost a key patent fight with rival Baxter International. Baxter inched up one penny, to $39.96. Bill Barnhart is on sabbatical.