One of the worst natural disasters in American history was still taking its awful toll on the Gulf Coast last week, but Wall Street was flying high with one of its best performances in months.

The markets have now risen for two straight weeks since the hurricane struck. It's a rally fed by a hunch that Katrina could bear a silver lining: a break from interest rate increases by the Federal Reserve.

The Fed next has a chance to raise rates on Sept. 20, but many analysts think it will take a pass because Katrina has already put a crimp on economic growth.

A drop in crude oil prices late in the week also fed investor confidence, even if it did little to ease consumer pain at the pump.

For the week, the Dow Jones industrial average was up 2.2 percent, to 10,678.56, its largest weekly gain since May. The Standard & Poor's 500-stock index had its best week since June, climbing 1.9 percent, to 1241.48. The Nasdaq composite index was the laggard of the group, though still robust, as it tacked on a 1.6 percent gain to close at 2175.51.

-- Griff Witte