Historic New Orleans, which has long feared extinction if a massive hurricane made a direct hit, endured extensive damage from Katrina's 135 mph winds after the storm came ashore from the Gulf of Mexico and roared along the coast.
By noon local time, Katrina's winds had decreased to 105 mph, a Category 2 storm with higher gusts, and its center was moving ashore at the Louisiana-Mississippi border.
The bowl-shaped city's levee system appeared to be holding off the Mississippi River and Lake Pontchartrain on its edges. Officials said a breach occurred in nearby St. Bernard Parish, where Katrina's eye passed and extensive damage was expected.
About 150 people were reported stranded on rooftops in that southeastern Louisiana parish, where 8 to 10 feet of water swamped the region.
However, Katrina's slight eastern turn that might have saved New Orleans brought its powerful winds and tides into the Mississippi coastal tourist havens of Biloxi and Gulfport.
The National Hurricane Center said the exposed Mississippi coastline could expect 15- to 20-foot storm surges. Mobile Bay in Alabama was swelling on Katrina's approach.
Winds sent debris flying through the New Orleans' streets, blew windows out of high-rise hotels and tore through the roof of the Superdome, where U.S. Sen. Mary Landrieu said 10,000 people had taken refuge.
Gov. Kathleen Blanco said in a news conference the damage had caused leaks and evacuees had been moved to dry areas in the stadium, but there was no immediate danger.
Weather experts had predicted thousands of homes could be damaged or destroyed and a million people left homeless if the storm surge was too great for the levees to hold back.
Officials estimated a million people had left the area ahead of the storm, which was once a fearsome Category 5 with winds of 175 mph, but many chose to ride it out. It hit land as a Category 4 on the five-step Saffir-Simpson scale.
President Bush on Monday approved major disaster declarations for the states of Louisiana and Mississippi, which would allow federal funds to be used for response and recovery efforts.
A costly storm
Katrina may be the to hit the United States, costing insurers as much as $25 billion, a storm modeler said on Monday.
"We expect the bulk of damage to be wind-related, but there is significant flood risk to commercial insurers," said Thomas Larsen, senior vice president at the modeler, Eqecat of Oakland, Calif.
A payout of $25 billion would make Katrina more expensive than Hurricane Andrew, the costliest U.S. hurricane ever, according to the Insurance Information Institute.
It often takes days or weeks after a major storm to assess damage, and several insurers on Monday said it was too soon to estimate losses. Katrina may have generated $2 billion in claims when it tore through Florida on Friday, analysts said.
Andrew resulted in about $20.9 billion of claims, after adjustment for inflation, when it plowed through southern Florida in 1992. Insurers last year paid out $22.8 billion for four Florida hurricanes, the insurance institute said.
Artist Matt Rinard, who owns a business in the French Quarter, holed up on the fifth floor of a Canal Street hotel and watched the storm roll in.
He said pieces of sheet metal and plywood, billboards and pieces of palm trees flew down Canal, which borders the Quarter, as huge gusts of wind blew through the city.
"It's blustery. You can see the speed of it now, it's unbelievable," he said. "The power went out about an hour and a half ago and so now I'm just watching the occasional dumbass walking down Canal Street."
Utility company Entergy spokesman Morgan Stewart said 317,000 customers had lost power in the storm and that the number was expected to grow.
In Mobile, Ala., 144 miles east of New Orleans, the storm slammed into transformers, knocking out power for about 200,000 people. Katrina's waves backed up a major canal in Gulfport, 71 miles east of New Orleans, threatening highways with floodwaters.
Officials said three people from a New Orleans nursing home had died during their evacuation to a Baton Rouge church.
New Orleans had not been hit directly by a hurricane since 1965 when Hurricane Betsy blew in, flooding the city. The storm killed about 75 people overall.
Katrina was making its second U.S. landfall after striking southern Florida last week, where it caused widespread flooding and seven deaths.
As the storm plowed through the Gulf, oil companies shut down production from many of the offshore platforms that provide a quarter of U.S. oil and gas output.
At least 42 percent of daily Gulf oil production, 20 percent of daily Gulf natural gas output and 8.5 percent of national refining capacity was shut on Sunday, producers and refiners said.