Hurricane no blow yet to market

In the aftermath of Hurricane Katrina, which left uncounted people dead, possibly 1 million out of work and estimates of as much as $50 billion in property damaged or destroyed, the stock market shrugged.

Will investors be so sanguine about Katrina months from now?

Wall Street is divided about whether the hurricane signals the beginning of an economic downturn, but, for the moment, the optimists are in the majority. The major indexes remain nearly flat for the year, just as they had before the hurricane.

That’s partly because, in the Alice in Wonderland world of stocks, disaster can prove profitable. The economy may lose steam for one quarter, the optimists say, but then the Gulf Coast will rebuild and the economy will carry on as before.

“Sometimes fixing the broken window does create real economic activity,” wrote Prudential Securities chief investment strategist Edward Keon, noting that it could be a use for significant amounts of money “sitting relatively idle in cash accounts.”

Standard & Poor’s Economics said Katrina has doubled the likelihood of a recession from less than 12 percent to 25 percent. “What would drive it is $100 (a barrel) oil prices,” said Beth Ann Bovino, a senior economist at S&P. “While the possibility has risen, we’re pretty confident of the health of the U.S. economy.”