Stocks got an unexpected boost on speculation the Federal Reserve will skip an expected interest rate hike in order to keep money cheaper during the Hurricane Katrina recovery.
The news helped blue chips post their biggest weekly gain in four months – an impressive 2.2 percent – with tech stocks and the broader market also posting weekly gains approaching 2 percent.
Oil prices dropped here by 41 cents to $64.08 a barrel, welcome relief to the $70.85 oil price just three weeks ago.
“The decline in oil helped, as well as the hope that maybe the Fed will be finished raising interest rates,” said analyst Peter Boockvar of Miller Tabak & Co.
Many on Wall Street think the Fed will pause in its steady quarter-point hikes in a key interest rate as a way to ease the economic impact of hurricane damage. The next hike was expected on Sept. 20.
The Dow Jones industrial average rose 82.63, or 0.78 percent, to 10,678.56, and the Standard & Poor’s 500 Index gained 9.81 to 1,241.48, up 1.9 percent for the week. Nasdaq was up 9.48 to 2,175.51, and ended the week 1.6 percent higher.
American International Group rose 2.5 percent to $61.23 after a UBS analyst said AIG’s losses from Hurricane Katrina were in the range of the hurricanes and other catastrophes in 2004 and not as bad as some were expecting.
The 10-year Treasury note rose 5/32 for a yield of 4.12 percent, down from 4.14 percent late Thursday. The Labor Department said U.S. import prices rose 1.3 percent in August, slightly above Wall Street forecasts, while July’s import price gains were revised to show a 0.8 percent rise instead of 1.1 percent, as initially reported.
Much of the overall increase reflected soaring petroleum costs, up 42.5 percent in the past 12 months.
Some analysts think a slowing demand for oil will help offset the storm’s impact on the nation’s Gulf Coast energy hub.