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Rally on day and week
Major gauges stretch post-Katrina stock advance to week two, with blue chips leading the way.
September 9, 2005: 7:32 PM EDT
By Alexandra Twin, CNN/Money staff writer

NEW YORK (CNN/Money) - Stocks rose Friday and for the second week in a row as investor fears about the long-term impact of Hurricane Katrina on oil prices and the economy began to diminish.

The Dow Jones industrial average (up 82.63 to 10,678.56, Charts) and the Standard & Poor's 500 (up 9.81 to 1,241.48, Charts) index both climbed around 0.8 percent.

The Nasdaq composite (up 9.48 to 2,175.51, Charts) added just over 0.4 percent.

Treasury prices inched modestly higher, lowering the yields, and the dollar fell versus other currencies.

For the week, the Dow gained 2.2 percent, the S&P 500 gained 1.9 percent and the Nasdaq gained 1.6 percent.

It was the second week in a row of gains for all three major gauges.

Stocks were a bit oversold heading into the Katrina disaster, said Paul Rabbit, president at Rabbit Capital Management. Then the disaster hit, and "when you have nothing but bad news, it typically creates a turning point where it's hard to disappoint the market, because so many negatives have happened."

After this period, stocks have been recovering, he said. "I think there is a growing sense that the economic impact from Katrina will be felt short-term, but six months out, you'll see a recapturing of lost GDP, and the recovery effort will actually be stimulative for the economy," Rabbit said.

Oil prices slipped after rising for most of the session. U.S. light crude for October delivery fell 41 cents to settle at $64.08 a barrel on the New York Mercantile Exchange, extending losses this week off post-Hurricane Katrina highs.

"You're seeing a modest extension of the gains of this week, with areas that saw some selling recently, like energy, sort of bouncing back," said Joe Sunderman, market analyst at Schaeffer's Investment Research.

"The concern is that we're getting near the high end of this trading range we've been in and there are some events next week that could derail the advance," he added, noting next week's heavy spate of economic reports, such as retail sales, the trade deficit, and consumer and producer prices."

Market breadth was positive. On the New York Stock Exchange, winners topped losers 11 to five on volume of 1.47 billion shares. On the Nasdaq, advancers topped decliners three to two as 1.65 billion shares traded.

What moved?

Oil service stocks recovered after several sessions of selling. The Amex Oil (up 27.57 to 1,074.06, Charts) index gained 2.6 percent and was one of the better performing sectors on the day.

Home builders also snapped back after Thursday's drubbing, lifting the Dow Jones Home Construction (unchanged at $1,016.50, Research) index by 2.8 percent.

TI and Intel both held mid-quarter updates after the close Thursday, and had mostly positive things to say.

Texas Instruments (down $0.01 to $33.74, Research) boosted the high end of its profit range for the current quarter, citing stronger demand. Intel (down $0.86 to $25.23, Research) narrowed the range of its revenue forecast but left the midpoint unchanged, saying business is basically meeting its expectations.

TI shares ended virtually unchanged. But Intel shares slipped 3.2 percent and topped the Nasdaq's most-active list. (For more on the two chip stocks, click here).

McDonald's (up $0.77 to $34.14, Research) added 2.3 percent after the restaurant chain reported that sales at stores opened a year or more, also called same-store sales, rose 3.4 percent in August versus a year ago. U.S. same-store sales rose 3.2 percent.

In other news, a Food and Drug Administration advisory panel recommended the approval of Pfizer's Exubera, the first inhaled insulin drug to reach market, and a potential big seller. The diabetes treatment was developed along with Nektar Therapeutics and Sanofi-Aventis SA.

Pfizer (down $0.18 to $26.33, Research) shares inched lower, while Nektar (up $0.45 to $19.59, Research) shares added 2.4 percent in unusually active Nasdaq trade. Sanofi-Aventis (up $0.31 to $41.68, Research) shares were modestly higher.

PalmSource (up $7.89 to $17.98, Research), which makes the Palm operating system for PDAs and cell phones, jumped 78 percent after accepting a buyout offer from Access, a Japanese software company. The $324 million in cash offer represents a more than 80 percent premium over the stock's closing price Thursday.

Treasuries rose, lowering the yield on the 10-year note to 4.12 percent from 4.13 percent late Thursday. Treasury prices and yields move in opposite directions.

The dollar fell versus the euro and the yen.

COMEX gold climbed $2.30 to settle at $449 an ounce.  Top of page

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