Rita Relief Proves Fleeting

Thankfully, Hurricane Rita ended up being much less disastrous than feared. Unfortunately (for bulls), the resulting relief-rally Monday similarly failed to live up to its advanced billing, as major averages finished well off their intraday highs.

Though 16 refineries remain shut after Rita's passage, they are expected to reopen soon, and overall damage of $6 billion is much less than the $20 billion estimated after Katrina. Furthermore, much of the relief had been felt Friday, as Rita was downgraded from a Category 5 to a Category 3 hurricane.

The much more disastrous impact of Hurricane Katrina four weeks ago had caused a spike in crude oil prices and a plunge in stock futures, followed by a weeklong unwinding of that anxiety through lower energy quotes and higher stock prices.

After Rita, the downside in crude oil prices and the upside in stocks were limited. Anxiety could therefore resurface more easily, as seen in a late morning rebound in crude oil prices. After dipping in morning trade, oil finished up $1.80 at $65.99 per barrel, with some traders speculating that refineries in Texas and Louisiana may be closed for longer than expected.

And after trading as high as 10,509.23, the Dow Jones Industrial Average finished with a more modest gain of 24.04 points, or 0.23%, at 10,443.63. The S&P 500 ended up 0.34 points, or 0.03%, at 1215.63, off an intraday high of 1222.56. The Nasdaq Composite finished up 4.62 points, or 0.22%, at 2121.46, vs. its intraday high of 2132.60.

"This was knee-jerk buying," says Chris Johnson, market strategist at Schaeffer Investment Research, speaking of the market's upside in the morning. "But this is a market that's going to continue favoring sellers. Sentiment is still optimistic, and we haven't seen a huge spike in fear, which would be necessary for a tradeable market bottom."