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NEW YORK (CNN/Money) -
Stocks gained Thursday, avoiding a fourth session of declines, as Hurricane Rita weakened enough to allow oil prices to ease and investors to scoop up select shares that had been battered of late.
But the advance was limited by worries about what may happen when the hurricane makes landfall, which could happen this weekend, and the impact it will have on the economy in the wake of Hurricane Katrina.
As of 5:45 p.m. ET, Nasdaq and S&P futures pointed to a modestly lower open for stocks Friday, when fair value is taken into account.
The Dow Jones industrial average (up 44.02 to 10,422.05, Charts) and the Standard & Poor's 500 (up 4.42 to 1,214.62, Charts) index each rose around 0.4 percent, while the Nasdaq composite (up 4.14 to 2,110.78, Charts) added 0.2 percent.
After the close, software maker Oracle (Research) slipped 5 percent after reporting quarterly revenue that rose from a year ago but fell short of estimates. That overshadowed the company's improved quarterly earnings that were in line with estimates.
Dow component Alcoa (Research) slipped more than 5 percent after the close, after the aluminum producer warned that third-quarter earnings would miss forecasts due to lower aluminum prices and higher energy costs.
There are no major earnings or economic reports scheduled for Friday.
Stocks had slumped for the previous three sessions as investors kept their eyes glued to weather reports and worried that a repeat of Katrina may be on tap.
Those worries remained in place Thursday. However, after a three-session sell-off, investors may have been slightly tapped out.
"You're seeing a little relief buying after the pressure of the last three days," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. "There was a lot of selling on the speculation about Rita, but now that it's getting closer to where it's expected to hit land, there's a backing off."
Nonetheless, concerns remain about Rita, recently downgraded to a Category 4 storm, as it churns toward the Texas Gulf Coast, forcing mass evacuations and threatening the oil infrastructure. (For more on the possible threat of Rita, click here.)
Although still unhinged by Rita's wrath, Ghriskey said the stock market may be reflecting a sense that at least this time around, the state and local governments seem poised to react more quickly and efficiently, following the debacle that surrounded Katrina.
Falling oil prices helped too. U.S. light crude oil for November delivery fell 30 cents to settle at $66.50 a barrel on the New York Mercantile Exchange. Oil had jumped in the morning and early afternoon, rising as high as $67.90 a barrel.
Homebuilders, retailers and some of the other stocks and sectors that had been hit over the last few sessions managed to bounce back. Meanwhile, energy and other recent winners suffered profit-taking.
"Today, we're seeing a more muted reaction to the storm after a difficult first half of the week," said Som Dasgupta, head of equity trading at PNC Financial Services Group.
He noted that considering the magnitude of the news of late, the market has held up reasonably well, "given what we have seen recently with Katrina, Rita, oil prices, and the Federal Reserve raising rates [on Tuesday]."
On the move
Dow component Caterpillar (up $0.89 to $58.00, Research) gained 1.6 percent on bets that it will benefit from the rebuilding effort following the storms. Home improvement retailer Lowe's (up $2.87 to $65.30, Research) gained for a similar reason.
Wal-Mart (up $0.70 to $43.19, Research) and other retailers also snapped back after a tough several sessions.
The S&P Retail (Charts) index gained 2.7 percent.
Homebuilders -- which have been under pressure off and on over the last week -- rebounded, after KB Home reported higher than expected fiscal third-quarter earnings that topped forecasts and boosted its 2005 earnings outlook.
KB Home (up $2.98 to $73.70, Research) shares gained over 4 percent and the Dow Jones Home Construction (up $25.45 to $942.20, Research) index gained 2.8 percent.
McDonald's (up $1.67 to $33.09, Research) jumped more than 5 percent after saying it palnned an initial public offering of its Chipotle Mexican restaurant chain and that its board has agreed to raise its annual stock dividend.
The rise in oil prices caused energy stocks to reverse course, with investors taking money out of the sector.
The Amex Oil (down 8.03 to 1,077.10, Charts) index fell 0.7 percent after having risen as much as 1 percent in the early afternoon.
Cognos (down $1.05 to $37.97, Research) slipped 4.5 percent after reporting weaker-than-expected second quarter software licensing revenue and warning that third-quarter earnings won't meet forecasts. That overshadowed the company's improved second-quarter earnings.
Market breadth was negative. On the New York Stock Exchange, losers beat winners nine to seven on volume of 1.86 billion shares. On the Nasdaq, decliners topped advancers by a slim margin as 1.72 billion shares changed hands.
The number of Americans filing new claims for unemployment rose to 432,000 last week, the highest in two years, the Labor Department reported. That was below economists' forecasts for a rise to 450,000, with most of the Katrina-related claims occurring in the previous two weeks.
Treasury prices ended little changed, with the yield on the 10-year note holding at about 4.17 percent.
The dollar gained versus the euro and the yen.
COMEX gold fell $2.30 to settle at $470.30 an ounce.
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