Pundits were caught off guard in July when Wall Street shrugged off terrorist bombings in London, sending the Standard & Poor's 500 up nearly 3 percent the day of the attacks.

So the market's reaction to Hurricane Katrina and the resulting $3-plus gasoline prices should come as no surprise. Since Aug. 26, the Friday before the storm hit New Orleans and the surrounding region, the S&P 500, the Dow Jones industrials and the Nasdaq index are up 3 percent. Locally, the Post-Gazette-Bloomberg index of 65 regional stocks has advanced more than 4 percent over the same period.

"I think the market's being kind," says John Frankola, portfolio manager for Vista Investment Management in Pittsburgh. "It's almost completely discounted the negative aspects of the storm."

Predictably, energy stocks have led the post-Katrina charge. S&P's Energy Select SPDR [Ticker: XLE], an exchange-traded fund that invests in oil, gas, energy equipment and services stocks, is up 10 percent since Aug. 26.

"The companies that look like they've been positively impacted have had a nice move," says Frankola, whose daughter was evacuated from New Orleans before she could start her freshman year at Tulane University.

Locally, two pure energy plays have done well. Indiana, Pa.-based Superior Well Services [SWSI], which went public last month at $13, shot up 17 percent over the last two weeks, closing Friday at $24.49. Atlas America [ATLS], a Moon natural gas and oil producer that went public last year, has enjoyed a 7 percent run over the same period, closing Friday at $48.

Another Katrina beneficiary is Michael Baker [BKR]. The Moon engineering and energy services firm's projects include operating oil platforms in the Gulf of Mexico and putting together a national digital map based on floods and other hazards for the embattled Federal Emergency Management Agency. Even though accounting issues have delayed reporting of its second-quarter results by one month (and counting), Baker shares have surged 17 percent, thanks to Katrina.

They closed Friday at $26.85.

The biggest local beneficiary of the storm has been Shaw Group [SGR], a Baton Rouge, La., company that provides construction, remediation and other services to government and private clients.

Shaw, which purchased Monroeville-based IT Group in 2002, hit a 52-week high Friday, closing at $23.55. Its shares have climbed 45 percent over the last two weeks.

Shaw had contracts in the Gulf region with the U.S. Army Corps of Engineers, the Louisiana National Guard and local governments in the region. Last week, FEMA gave Shaw a new contract, with a potential value of up to $100 million, to build housing for persons left homeless by the storm.

Most analysts expect higher energy prices to crimp consumer spending, but you'd never know it the way some stocks that rely on consumer spending have behaved. S&P's Consumer Discretionary SPDR [XLY] has advanced 1 percent in Katrina's wake.

Marshall-based American Eagle Outfitters [AEOS] hasn't been as lucky. It's down 4 percent over the last two weeks, closing Friday at $26.39.

"At $3 at the pump, people are going to be doing less shopping. I think that's where there's the most concern," Frankola says.

Worries that consumer spending will falter are evident in the performance of MTR Gaming Group [MNTG]. Those who placed bets Aug. 26 on the operator of Mountaineer Race Track have lost 8 percent, based on Friday's closing price of $8.81.

Many believe gas prices, which receded last week, will continue falling as Gulf refineries are repaired and resume operations. Charlie Smith, chief investment officer of Fort Pitt Capital in Green Tree, says the refineries will be back in action over the next few weeks. He's forecasting gas will fall below $2.50 a gallon by Christmas.

"The stock market is behaving quite well and should be able to weather the spate of coming earnings nicks as a result of the storm," he says.

Smith is confident Katrina won't cause a recession, citing strong job growth and the strength of corporate balance sheets.

However, market analysts are a lot like meteorologists. You only have to change channels to get a different forecast.

"There's a lot of worrisome things happening here," says Thomas Mangan, a portfolio manager for James Investment Research of Alpha, Ohio. "It's kind of hard to see a sustained rally at this point."

Mangan believes the U.S. economy was headed for a major slowdown even before Katrina. While rebuilding towns destroyed by the storm will provide a short-term boost, he says higher interest rates and higher oil prices will have a much broader and longer-term impact. That's why James is forecasting at least a 20 percent correction over the next six months to a year. Based on its close Friday, that would take the S&P 500 down to just below 1,000, depths it hasn't plumbed since September 2003.

Making sense of the market wasn't easy when there was just Iraq, terrorist attacks, high energy prices, rising interest rates and imploding hedge funds to worry about. Katrina muddies the waters even more.

But count your blessings. You're safe. You're dry. And if you're a long-term investor, this month's ups and downs are a very small part of the big picture.

As always, be careful out there.