Stocks jump as oil slumps

• Hiring holds steady
• Half of 'rescued' borrowers still default
• Job outlook gets gloomier
• Where the jobs are
• Where the jobs are

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NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday morning as oil prices slumped on indications that Hurricane Gustav caused less damage than expected along the Gulf Coast.

The Dow Jones industrial average (INDU), the broader Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) all rallied in the early going.

On Friday, stocks declined at the end of an otherwise upbeat August, as investors geared up for Gustav's approach. All financial markets were closed Monday for Labor Day.

Downgraded to a tropical depression, Gustav churned north through Louisiana on Tuesday. The hurricane made landfall on Monday, forcing the evacuation of nearly two million residents on coastal Louisiana, and knocking out power for 800,000 people. Property damage could total $6 billion to $10 billion, according to risk modeling firm Eqecat Inc., which pales compared to the more than $40 billion in property damage caused by Hurricane Katrina in 2005.

Oil: In Nymex electronic trading, oil declined $7.57 a barrel to $107.90, amid the perception that the hurricane did not cause as much damage to oil rigs in the Gulf of Mexico as had been expected.

Nymex allowed electronic trading on oil beginning Sunday when Gustav neared the oil producing Gulf. Prices rose as high at $118.60 in the special session before retreating. Still, analysts considered the increases to be unexpectedly modest in the face of the hurricane. (Full story)

The nationwide average for retail gas prices slipped a fraction of a cent, according to a Tuesday report from the motorist group AAA, alleviating fears that prices at the pump might spiral out of control in the wake of Gustav.

Economy: At 10 a.m. ET, the Commerce Department will release its report on construction spending in July. A consensus of economists expects spending to drop 0.4%, matching the decline of the prior month.

Also at 10 a.m., the Institute for Supply Management will release its ISM Index, a measure of manufacturing activity based on a survey of purchasing managers. A consensus of economists expects the index for August to be 49.5, dipping below the July level of 50.5, but still hovering close to the middle-ground level of 50.

Currency, international stocks: The dollar gained against the euro, the Japanese yen and the British pound, rallying as a result of the lower oil prices.

Japanese stocks closed lower Tuesday after Prime Minister Yasuo Fukuda's surprise resignation. European markets rose in early trading.