Katrina causes low finish

"I consider this event as critical, if not more economically damaging, as Sept. 11, 2001," said Paul McManus, senior vice president at Independence Investment LLC. "We have no idea what the extent of the damage is down there, and we may not know until next week."

Wall Street felt some relief from a drop in oil prices, which fell after the government and members of the Paris-based International Energy Agency said they would tap reserves to counter disruptions to 90 percent of oil production in the Gulf of Mexico. Gasoline futures also eased for the first time this week.

A barrel of light crude sank $1.90 to settle at $67.57 on the New York Mercantile Exchange, where gasoline futures dropped 22.5 cents to $2.18 per gallon.

At the close of trading, the Dow Jones industrial average fell 12.26, or 0.12 percent, to 10,447.37.

The broader stock indicators also were lower. The Standard & Poor's 500 index slipped 3.57, or 0.29 percent, to 1,218.02, and the Nasdaq composite index closed down 6.83, or 0.32 percent, at 2,141.07.

Bonds edged higher, with the yield on the 10-year Treasury note slipping to 4.02 percent from 4.03 percent on Thursday. The U.S. dollar was mixed against other major currencies in European trading, while gold prices pulled back slightly.

Investors largely ignored a report from the Labor Department showing that the 169,000 jobs created in August were fewer than the 190,000 predicted by economists, even as the job growth pushed unemployment down to a low of 4.9 percent from 5 percent the month before.

But interpreting the data - coupled with several lackluster reports earlier this week - was complicated by the worsening situation in Katrina's wake. Many fear the aftermath of the storm will exacerbate a slowdown already happening in the economy and persuade the Federal Reserve to halt its string of interest-rate hikes.

"Confidence is slipping, manufacturing is slowing, and even with today's jobs report, the employment trend is still negative," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "The bet here is that the Federal Reserve will have to stop raising rates in order to keep the economy from sliding further."

Across the country, consumers are already reeling from the storm's fallout, which has severely limited gas supplies and boosted retail prices to levels well above $3 a gallon. And with no sign when shipping terminals along the Gulf Coast - some of the nation's most active - will resume operation, Wall Street is bracing for the worst.

"I don't think people appreciate the importance of the (Gulf Coast) region to the U.S. economy," said McManus, who sees economic activity declining for a month or two. "It's going to be felt really hard."

Nonetheless, the market stood its ground and managed modest gains during a week when crude oil surged past $70 a barrel. For the week, the Dow rose 0.48 percent, the S&P added 1.07 percent and the Nasdaq climbed 0.96 percent.

In corporate news, Boeing Co.'s largest union struck Friday, shutting down airplane production for the first time in 10 years. The International Association of Machinists and Aerospace Workers rejected a proposed three-year deal, saying the airline ignored demands for higher pensions, stronger job security and better health benefits. Boeing declined $1.65 to close at $64.34.

Airlines also came under more pressure from the recent surge in oil prices. Late Thursday, Northwest Airlines Corp. warned it could lose as much as $400 million this quarter as greater spending on jet fuel pushes the troubled air carrier dangerously close to bankruptcy. Northwest's mechanics are still on strike, but its pilots said they would negotiate a new round of pay cuts. Northwest dropped 34 cents to $3.63.

Elsewhere, Albertson's Inc. jumped $2.32, or 11.2 percent, to $23.05 after the nation's second-largest supermarket chain said it was considering putting itself on the auction block. While Albertson's first-quarter profit nearly tripled in June.