US stocks: Markets rise as Rita weakens

NEW YORK - US stocks rose on Thursday after Hurricane Rita was downgraded to a Category 4 storm, easing fears it would cause as much damage as Hurricane Katrina and disrupt oil production to the same extent.

The market had held in a tight range through the early part of the session, with investors hesitant to make big bets as Rita barrelled toward the Texas coast and the heart of the US oil refining business three weeks after Katrina hit the US Gulf of Mexico region.

"The stock market is very jittery because of the hurricane," said Warren Simpson, a managing director at Stephens Capital Management in Little Rock, Arkansas, with $2.5 billion in assets.

"Any positive news in regards to the storm will push the market up."

Investors bought shares of companies that may benefit from rebuilding after the storm, such as Caterpillar Inc., the heavy-equipment maker. Caterpillar, a Dow component, rose 1.6 per cent to $58.

The Dow Jones industrial average was up 44.02 points, or 0.42 per cent, at 10,422.05. The Standard & Poor's 500 index was up 4.42 points, or 0.37 per cent, at 1,214.62. The technology-laced Nasdaq Composite Index was up 4.14 points, or 0.20 per cent, at 2,110.78.

After the closing bell, trading in Alcoa Inc. was halted after the world's largest aluminum producer and Dow component warned that its third-quarter earnings would be as much as 39 per cent below Wall Street estimates.

Alcoa cited lower aluminum prices as well as higher costs for energy and raw materials as the reasons for the projected earnings shortfall. During the regular session, Alcoa shares fell 0.7 per cent, or 18 cents, to $25.90 on the New York Stock Exchange.

During afternoon trading in the regular session, stocks rose as crude oil prices retreated after Rita's downgrade. NYMEX November futures fell 30 cents to settle at $66.50 a barrel after hitting $67.90, a session high, in morning trade.

"Crude futures are down as investors see the storm going in a less economically vulnerable area, and that's what has got the market rallying," said Tom Schrader, managing director at Legg Mason Wood Walker.

Katrina, one of the nation's worst natural disasters, struck the US Gulf Coast in late August, heavily damaging oil rigs and refineries and lifting crude prices to record highs.

Advancing stocks included McDonald's Corp., a Dow component, up 5.3 per cent, or $1.67, at $33.09 on the New York Stock Exchange. The world's largest restaurant company said on Wednesday it is planning an initial public offering of its popular Chipotle chain, but won't pursue a new structure for its real estate assets.

Shares of oil- and gas-related companies reversed earlier gains. The S&P oil & gas exploration and production index slipped 0.8 per cent. Chevron Corp. stock fell 0.8 per cent, or 50 cents, to $63.77, while shares of rival energy company ConocoPhillips slid 1 per cent, or 67 cents, to $69.76, both in NYSE trading.

Trading was heavy on the New York Stock exchange, with about 1.87 billion shares changing hands, above last year's average of 1.46 billion.

On Nasdaq, about 1.73 billion shares were traded, below last year's daily average of 1.81 billion.

Declining shares outnumbered advancing stocks by a ratio of about 6 to 5 on the NYSE. On Nasdaq, declining stocks outpaced advancing shares by a ratio of about 8 to 7.

- REUTERS