Stocks gained Monday, recovering from early losses, as Hurricane Katrina weakened after making landfall and crude prices retreated from a record high above $70, luring investors into the market. News of corporate acquisitions and rising home-imporvement stocks also helped.
The Dow Jones industrial average (search) was up 65.76 points, or 0.63 percent, at 10,463.05. The Standard & Poor's 500 Index (search) was up 7.18 points, or 0.60 percent, at 1,212.28. And the technology-laced Nasdaq Composite Index (search) was up 16.88 points, or 0.80 percent, at 2,137.65.
Oil futures ended up a mere $1.07 to $67.20 a barrel on the New York Mercantile Exchange (search) after hitting a record high $70.80, up more than $4, overnight.
"Everybody was expecting this hurricane to be one of biblical proportions and that oil prices were going to climb sharply," said Angel Mata, managing director of listed equity trading at Legg Mason Wood Walker in Baltimore. "As the storm weakened, oil prices retreated and demand for stocks rebounded."
The U.S. National Hurricane Center downgraded Hurricane Katrina to a Category 1 storm with winds of 105 mph. Katrina made landfall near the Louisiana-Mississippi border and was moving north.
Still, Katrina may be the most expensive hurricane ever to hit the United States, according to Fitch Ratings and storm modeler Eqecat. Eqecat said the insured loss would be in the range of $12 billion to $25 billion.
Shares of home-improvement retailers rose on expectations that demand for building materials would rise in the storm's wake. Home Depot Inc. (HD), the No. 1 home improvement retailer, rose 1.8 percent to $40.54 while No. 2 Lowe's Cos. Inc. (LOW) advanced 2.2 percent to $64.60 on the New York Stock Exchange.
"The market overreacted to the storm and that attracted buyers at key technical levels," said Elliot Spar, market strategist with Ryan Beck & Co., of Shrewsbury, N.J.
"I'm a little surprised the oil prices haven't hurt the market more," said Giri Cherukuri, head trader at OakBrook Investments LLC, of Lisle, Illinois.
He suggested that investors viewed oil's spike as temporary in light of the storm.
"People were thinking about this all weekend, about the prices going up, and maybe some people are a bit more forward thinking," Cherukuri said.
Energy companies' shares, which earlier had risen, pared some of those gains as oil prices receded. ConocoPhillips (COP) finished up 1.92 percent to $63.07 and oil-field services company Halliburton Co. (HAL) gained 0.94 percent to $57.80 on the NYSE.
The U.S. economy has been resilient to the increase in oil prices, Bob Doll, chief investment officer of Merrill Lynch Investment Managers, said in a note to clients.
"Rising energy prices so far had surprisingly little impact on consumer spending and corporate profits," he said. "Some observers have argued that the boom in energy prices has helped energy company profits, offsetting the negative impact the high prices have had on nonenergy-related companies." Shares of insurance companies fell, including St. Paul Travelers Co. (STA) , which slid 47 cents to $44.27, and Allstate Corp. (ALL), which dropped 1.3 percent to $57.18.
Shares of gaming companies with operations in storm-affected regions were lower. Isle of Capri Casinos (ISLE), which operates riverboat casinos, were off 2.73 percent to $23.52 on the Nasdaq.
Bonds closed higher, with the yield on the 10-year Treasury note falling to 4.17 percent from 4.19 percent Friday. The U.S. dollar was mixed against other major currencies in European trading, while gold prices slipped.
Elsewhere, other stocks enjoyed gains amid more corporate acquisitions. PanAmSat Holding Corp. (PA) agreed to be acquired by privately held Intelsat Ltd. for $3.2 billion in cash, forming the world's biggest commercial satellite fleet. The $25 per share offer is a 25 percent premium to PanAmSat's closing price of $19.80 on Friday. PanAmSat surged $4, or 20.2 percent, to $23.80.
Per-Se Technologies Inc. (PSTI) and Dutch publisher Wolters Kluwer said they are buying NDCHealth Corp. (NDC), a maker of software for processing health-care claims and prescription data, in separate deals totaling $700 million in cash and stock, plus the assumption of $270 million in debt. Per-Se declined 59 cents to $19.45, while NDC added $1.18 to reach $18.95.
Trading was light on the New York Stock Exchange where gainers beat decliners by about 5 to 3. About 1.2 billion shares were traded, below the 1.5 billion daily average for last year.
On Nasdaq, gainers outnumbered decliners by a ratio of about 3 to 2, with about 1.3 billion shares changing hands, below the 1.8 billion daily average last year.
The Russell 2000 index of smaller companies rose 6.68, or 1.03 percent, to 655.32.
Overseas, Japan's Nikkei stock average fell 1.04 percent, Germany's DAX index climbed 0.59 percent, and France's CAC-40 rose 0.43 percent. The British stock market was closed for a holiday.
Reuters and the Associated Press contributed to this report.