Market rallies as Rita weakens

Wall Street lifted itself out of a fourth day of losses Thursday, closing higher as Hurricane Rita weakened slightly.

Investors bid stocks up as oil prices declined. Stocks that had been doing poorly for weeks, such as retailers and consumer goods companies, rebounded.

“Maybe it’s one of those things where the balloon was pushed under water so far that it’s bounced to the surface,” said Jon Brorson, head of growth equities at Neuberger Berman in Chicago.

Investors still feared that Rita could compound the damage done by Hurricane Katrina, leading to higher oil prices and a dramatic drop in consumer spending. “It’s all about oil,” said Paul McManus, senior vice president and director of research, Independence Investment LLC. Traders sent their clients weather updates and lists of oil rigs at risk Wednesday morning.

But as the National Hurricane Center downgraded the storm to Category 4 from Category 5 during the afternoon, some investors relaxed a little and starting searching for bargains after three down days.

“Everyone is just sitting back and watching their weather maps,” McManus said.

Crude oil futures fell as fears about the storm lost some intensity. A barrel of light crude settled at $66.50, down 30 cents, on the New York Mercantile Exchange.

The Dow Jones industrial average rose 44.02, or 0.42 percent, to 10,422.05 after losing nearly 264 points since Monday and falling 27 more points Thursday before turning higher. Gains by Dow components McDonald’s Corp. and Wal-Mart Stores Inc. led the index higher.

Broader stock indicators also closed up. The Standard & Poor’s 500 index rose 4.42, or 0.37 percent, to 1,214.62, and the Nasdaq composite index rose 4.14, or 0.2 percent, to 2,110.78.

Bonds dipped, with the yield on the 10-year Treasury note rising to 4.18 percent, up from 4.17 percent late Tuesday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were lower.

Declining issues led advancers 9 to 7 on the New York Stock Exchange where preliminary consolidated volume was 2.42 billion shares, down from 2.55 billion at the same time Wednesday.

The Russell 2000 index of smaller companies rose 1.22, or 0.19 percent, to 651.16.

Overseas, Japan’s Nikkei stock average fell 0.28 percent. Britain’s FTSE 100 rose 0.30 percent, Germany’s DAX index fell 0.54 percent, and France’s CAC-40 fell 0.45 percent.