Stocks rallied strongly yesterday as investors grew more confident about the prospects for the economy despite the impact of hurricanes Rita and Katrina.

While many of the hurricanes' long-term effects have yet to be determined, stocks rebounded after two weeks of losses on bullish comments from analysts and the government. However, the markets remain relatively unchanged for the month, and trading was very light.

The advance was helped by reports showing consumer and business spending increased more than previously estimated in the second quarter and unemployment claims fell more than forecast last week.

The market's gains may be short-term, as investors wait for new economic data that will give Wall Street a better feel for the storms' effects on employment, consumer demand and industrial production. Next month's third-quarter earnings will also be an important indicator of the economy's health.

The Dow Jones industrial average rose 79.69, or 0.8 percent, to 10,552.78. The Standard & Poor's 500-stock index advanced 10.79, or 0.9 percent, to 1227.68. The Nasdaq composite index climbed 25.82, or 1.2 percent, to 2141.22.


PepsiCo rose $1.44, to $56.50. The company said its third-quarter profit dropped because of a charge related to repatriation of overseas earnings. Still, its results without the charge beat Wall Street estimates.

E-Trade Financial climbed 89 cents, to $17.22, after it said it will acquire BrownCo, the online deep-discount brokerage service of J.P. Morgan Chase, for $1.6 billion. J.P. Morgan rose 43 cents, to $34.35.

General Electric gained 16 cents, to $33.65, after it said its health care unit would buy IDX Systems, which produces software for hospitals and doctors' offices, in a deal the companies valued at $1.2 billion. IDX rose 23 percent, or $8.08, to $43.25.

Red Hat, the biggest distributor of computer software for the Linux operating system, rose $4.93, to $21.44, after raising its sales and earnings forecasts. Novell, another seller of Linux software, climbed 33 cents, to $7.36.

Humana, the biggest manager of health plans for the U.S. military, fell 47 cents, to $48.59.


New York Stock Exchange composite index rose 57.40, to 7632.50.

American Stock Exchange index rose 5.90, to 1731.37.

Russell 2000 index of smaller-company stocks rose 8.99, to 665.03.


NYSE: 2.17 billion shares, up from 2.13 billion on Wednesday. Advancers outnumbered decliners 7 to 3.

Nasdaq: 1.82 billion shares, up from 1.73 billion. Advancers outnumbered decliners 7 to 4.


Crude oil for November delivery: $66.79, up 44 cents.

Gold for current delivery: $472.30 a troy ounce, up from $469.70 on Wednesday.