Katrina did not affect oil price greatly, but could

The stock market stood firm against Hurricane Katrina's punishing winds and driving rain.

Stocks surged Monday after falling in the morning as the storm weakened and oil prices retreated from a 23-year New York Mercantile Exchange high of $70.80 a barrel.

"Investors had a chance to jump off a cliff — they did not," Al Goldman, chief market strategist at A.G. Edwards was quoted as saying by New York Daily News. "They are confident in the economy."

Oil prices had initially shot sky-high as Katrina stormed through the Gulf of Mexico, where one quarter of all U.S. oil production takes place.

But prices fell later in the day as the storm was downgraded and the government said it may release oil from reserves if necessary.

The cost of Katrina will still be massive, with insurance companies expected to take a hit of between $10 billion to $25 billion. That would make Katrina the most expensive disaster since the Sept. 11 terrorist attacks and could make it the costliest U.S. hurricane ever, according to New York Daily News.

Some insurance stocks, like Allstate, St. Paul Travelers and Hartford Financial fell yesterday because they have significant exposure in the Southeast.

But the sector was less hurt than initially expected.

"We didn't see a big sell-off," said Clifford Gallant, an analyst at Keefe Bruyette & Woods. "The market is getting smarter about these events."

The storm did hurt casino companies that operate in Louisiana. Isle of Capri Casinos fell 66 cents to $23.52. Boyd Gaming fell 20 cents to $47.59.

Airline stocks also were hit over concern that any sustained increase in the price of oil could further hurt their turbulent profits. American Airlines parent AMR, closed down 1.9% at $13.40, while Continental fell 39 cents, or 2.7%, to $13.83.

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