Stocks rally as oil prices drop steeply
The Dow was up 1.5% on news of lighter-than-expected damage from Hurricane Gustav. Financial stocks surge as well.
NEW YORK -- A steep drop in oil prices caused by lighter-than-expected damage from Hurricane Gustav propelled the stock market higher this morning, with the Dow industrials leaping more than 200 points at the start of the trading session.
Oil prices fell sharply after Hurricane Gustav hit the Louisiana coast with less fury than anticipated, and oil-production facilities in the Gulf of Mexico appeared to avoid heavy damage.
Crude oil for October delivery fell $7.54 to $107.92 a barrel. Other commodities, including gold and copper, also fell.
That sparked a rally in oil-sensitive stocks such as airlines and automakers, as well as in consumer-oriented issues such as retailers and home builders.
Financial stocks marched higher after the state-run Korea Development Bank confirmed that it was in talks to invest in Lehman Bros. Holdings Inc., the fourth-largest Wall Street investment bank, which needs to replenish its capital after a string of mortgage-related losses. Lehman shares spiked 47 cents, or 3%, to $16.56.
As of 8 a.m. PDT, the Dow Jones industrial average was up 170.17 points, or 1.5%, to 11,713.72.
The Standard & Poor's 500 index had gained 12.22 points, or 0.9%, to 1,295,27, while the Nasdaq composite index advanced 24.02 points, or 1%, to 2,391.54.
The Dow Jones transportation index jumped 1.3% and the KBW bank index swelled 3%.
walter.hamilton@latimes.com
