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Stocks extend rally as oil, gas prices fall

Wall Street advanced solidly Friday to finish the week higher as oil prices cooled and investors embraced signs that the economy could move forward despite Hurricane Katrina’s devastation of the Gulf Coast.
/ Source: The Associated Press

Wall Street advanced solidly Friday to finish the week higher as oil prices cooled and investors embraced signs that the economy could move forward despite Hurricane Katrina’s devastation of the Gulf Coast. The major indexes scored solid gains for the week.

Falling energy prices helped brighten the economic picture left in Katrina’s wake, with crude oil sliding and gas futures slipping below $2 a gallon. Investors also anticipated a burst of activity once reconstruction begins in the Gulf region.

“The market seems to be concentrating on the future rebuilding of the devastated area, and I think that’s what’s keeping the market from declining,” said Peter Cardillo, chief strategist at S.W. Bach & Co.

Revised forecasts from chipmakers Texas Instruments Inc. and Intel Corp. late Thursday bolstered the market with indications that consumer spending remains healthy. Texas Instruments raised its quarterly estimates — fueling hopes for greater electronics demand and calming fears of a spending slowdown — while rival Intel refined its previous view.

The benchmark Dow Jones industrial average climbed 82.63, or 0.78 percent, to close at 10,678.56, up 2.2 percent for the week.

Bonds ended higher, with the yield on the 10-year Treasury note sliding to 4.12 percent from 4.14 percent on Thursday.

Volume was light — typical of a late-summer session — as investors awaited more information about the rising damage toll left by Katrina.

Stocks were boosted this week by the growing belief among investors that the Federal Reserve will halt its yearlong string of interest-rate hikes when it meets this month, in part to contain lending costs for Gulf Coast reconstruction.

But at least one analyst said he was still convinced the Fed will lift its benchmark overnight rate by another quarter-percentage point despite concerns about inflation and fallout from the storm.

“Right now, I believe they will raise the rate by 25 basis points. They have been very clear telegraphing what they plan to do,” said Paul Cherney of Cherney Market Analysis. “They’re going to have to address (Katrina’s impact) in some fashion, but they’ll probably use plain vanilla, uninspiring wording.”

Oil futures traded lower even after the Department of Energy said that domestic energy costs this winter would be the highest in 10 years and that at least four Gulf Coast refineries would remain closed for months.

Crude oil fell 41 cents to $64.08 a barrel on the New York Mercantile Exchange, while gas futures declined 7.6 cents to $1.96 a gallon.

While Intel said business remains within expected levels, Texas Instruments lifted both its profit and revenue forecasts, citing greater demand across most of its segments.

Texas Instruments was higher through most of Friday’s session, but closed down 3 cents to $33.74. Intel declined 84 cents to $25.25.

Airline stocks fell after Continental Airlines Inc. warned of a “significant loss” for 2005 as soaring fuel costs continue eating into the $300 million the carrier expected to save this year from job and benefits cuts.

Northwest Airlines Corp. plans to lay off two-thirds of its mechanics and ask for $200 million in concessions in its latest proposal to its mechanics union, which has been on strike for three weeks.

Boeing Co. stock jumped 78 cents to $65.40 after The Wall Street Journal reported the company is negotiating a settlement with the Justice Department that would allow it to avoid prosecution in two federal probes.

Fast-food chain McDonald’s Corp. said global sales at its restaurants open at least a year grew 5.7 percent in August, with same-store results 3.2 percent higher in the United States and 3.6 percent in Europe. The company credited new products, extended hours and improved breakfast business. McDonald’s added 77 cents to $34.14.

Advancing issues outpaced decliners by more than 11 to 5 on the New York Stock Exchange, where volume of 1.47 billion shares topped the 1.45 billion shares traded on Thursday.