US stocks rose on Friday and the blue-chip Dow had its biggest weekly gain since May as investors bet the Federal Reserve would pause in its campaign to raise interest rates due to economic fallout from Hurricane Katrina.
The major stock indexes finished higher for the second straight week. The Dow Jones industrial average rose 2.2 percent this week, its biggest gain since May 22. The Standard & Poor's 500 index ended the week 1.9 percent higher, and the Nasdaq Composite Index advanced 1.6 percent.
Meanwhile, Exxon Mobil Corp was among Friday's biggest gainers on the blue-chip Dow as investors bet that high oil prices would continue to fatten profits at energy companies, even as crude prices fell for the day.
Exxon, the world's largest publicly traded oil company, rose 3 percent to $63.20, while Chevron advanced 2.8 percent to $63.81.
The Dow average finished up 82.63 points, or 0.78 percent, at 10,678.56 on Friday. The S&P 500 Index was up 9.81 points, or 0.80 percent, at 1,241.48. The Nasdaq index was up 9.48 points, or 0.44 percent, at 2,175.51.
"The decline in oil helped, as well as the hope that maybe the Fed will be finished raising interest rates," Peter Boockvar, equity strategist at Miller Tabak & Co, said.
Many investors and analysts expect the Fed will likely refrain from raising rates at least one of its meetings this year to help minimise the economic impact of Hurricane Katrina. Its next meeting is on September 20.
US crude oil futures fell 41 cents to $64.08. Oil rose as high as $70.85 per barrel last month. Investment bank Goldman Sachs upgraded the oil and gas sector to "overweight" from "neutral," citing higher oil price forecasts.
Trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 1.6 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.
The number of stocks rising on the New York Stock Exchange outnumbered those falling by more than 2 to 1. On Nasdaq, advancers led decliners by about 2 to 1. Among advancing stocks, insurance company American International Group Inc rose 2.5 percent to $61.23. UBS insurance analyst Andrew Kligerman said AIG's losses from Hurricane Katrina were in the range of the hurricanes and other catastrophes in 2004 and not as bad as some were expecting.
Shares of McDonald's Corp climbed 2.3 percent to $34.14 on the NYSE after the hamburger chain reported its August sales rose, aided by demand for its higher-priced chicken sandwiches.
Intel Corp fell after it narrowed its revenue forecast range, saying business remained within expectations. Intel shares slumped 3 percent to $25.25.
Shares of trucking companies fell a day after Yellow Roadway Corp cut its third-quarter profit outlook due to the impact of Hurricane Katrina.
The Dow Jones US trucking index was off 2 percent, with Yellow Roadway down almost 7 percent at $42.81.
In technology news, shares of chip maker PalmSource Inc soared after Japanese software developer Access Co said it would make the U.S software company wholly owned in a $324 million cash deal. Shares soared 78 percent to $17.98 on Nasdaq.
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