US stocks rose yesterday after Hurricane Rita was downgraded to a Category 4 storm, easing fears it would cause as much damage as Hurricane Katrina and disrupt oil production to the same extent.
The market had held in a tight range through the early part of the session, with investors hesitant to make big bets as Rita barreled towards the Texas coast and the heart of the US oil refining business three weeks after Katrina hit the US Gulf of Mexico region.
"The storm is drifting east and the further east of Houston it gets, the less damage it is going to do to refineries in the Houston area," said Tom Schrader, managing director at Legg Mason Wood Walker. "Crude futures are down as investors see the storm going in, in a less economically vulnerable area that's what has got the market rallying."
The Dow Jones industrial average was up 44.02 points, or 0.42 per cent, to end at 10,422.05. The broad Standard & Poor's 500 index was up 4.43 points, or 0.37 per cent, to finish at 1,214.63. The technology-laced Nasdaq Composite Index was up 4.14 points, or 0.20 per cent, to close at 2,110.78.
Crude oil prices retreated after Rita's downgrade. Nymex November futures fell 30 cents to settle at $66.50 (€) a barrel after hitting a session high at $67.90 in morning trading.
Katrina, one of the nation's worst natural disasters, struck the US Gulf Coast in late August, heavily damaging oil rigs and refineries and lifting crude prices to record highs.
The dollar firmed broadly as speculation Hurricane Rita may not be as damaging as feared supported a currency already gaining ground on technical factors.
Dealers said the modest downgrade to Rita helped push the US dollar higher against the Canadian dollar, lending the US dollar broader strength.
The euro traded at $1.2146, down 0.6 per cent since late Wednesday. The euro has been on the rise against the dollar this week because of concerns over the storm.
Smart Telecom yesterday came to the rescue of a Houston, Texas-based energy and technology company by agreeing to back up the company's data store to prepare it for the onslaught of Hurricane Rita.
Spectrum Energy and Information, which is registered in the UK, was yesterday ordered to evacuate its premises as Rita, thought to be the most intense storm ever to hit Texas, was slated to reach the city later today.
