US stocks rose for the second straight day on Wednesday, helped by a brokerage upgrade of restaurant chain McDonald's Corp and a sharp drop in energy prices as oil operations slowly recovered from the effects of Hurricane Katrina.
Investors also expected the economy to get a boost from the US government's rebuilding efforts along the Gulf Coast following the hurricane.
But the market's gains were limited by a report showing lower labor productivity and rising wage costs, which renewed concerns about inflation and the outlook for interest rates.
The Dow Jones industrial average was up 44.26 points, or 0.42 percent, at 10,633.50. The Standard & Poor's 500 Index was up 2.97 points, or 0.24 percent, at 1,236.36. The technology-laced Nasdaq Composite Index was up 5.17 points, or 0.24 percent, at 2,172.03.
"It is an impressive showing for the market again," said Michael Metz, chief investment strategist at Oppenheimer & Co.
"Hurricane Katrina seems to be put into the background. You are going to see the economy get some stimulus from federal spending. Crude oil moved down today and that helps," he said.
Restaurant stocks rose following upgrades by several Wall Street analysts who said recent share declines in the sector due to investor jitters about Hurricane Katrina and the run-up in gasoline prices offered good buying opportunities.
McDonald's climbed 3.2 percent to $33.70 after Bear Stearns upgraded its shares. The S&P's restaurants index was up 2.6 percent, its third straight day of gains. Bear Stearns analysts also upgraded the restaurant sector.
US crude oil futures fell as oil and gas operations in the US Gulf Coast recovered slowly after Hurricane Katrina's devastation. NYMEX October crude dropped $1.59 to $64.37 a barrel.
October gasoline settled at $2.022 a gallon, losing 3.28 cents, or 1.6 percent.
Industrial companies, which are considered benchmarks of the US economy, rose on lower oil prices, with Dow component 3M rising 1.5 percent to $73.77 and heavy-equipment maker Caterpillar Inc climbing nearly 1 percent to $59.07.
Another Dow component, Pfizer Inc, rose 1.6 percent to $26.30 amid anticipation that a Food and Drug Administration panel meeting on Thursday could give the drug maker's inhaled insulin treatment, called Exubera, a favourable recommendation, an analyst said.
Apple Computer Inc unveiled a cell phone that works like an iPod music player and said that it would introduce a new iPod digital music player called the nano. Apple, which was up earlier, ended down 12 cents at $48.68 after new product announcements.
Altera Corp, a maker of programmable microchips was among the biggest decliners on Nasdaq, sinking almost 7.7 percent to $20.11 after cutting its profit margin forecast.
In a positive sign for the economy, the Federal Reserve's summary of economic conditions, known as the beige book, said business activity increased across the United States from mid-July through August, but it covered the period before Hurricane Katrina struck.
On the NYSE, about 1.49 billion shares were traded, above the 1.46 billion daily average for last year and on Nasdaq 1.49 billion shares changed hands, below the 1.81 billion daily average.
Advancers slightly outpaced decliners on both the NYSE and Nasdaq.
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