Wall Street was encouraged when oil prices fell below $65 per barrel as more Gulf Coast production facilities resumed operations and traders saw that Katrina's damage to petroleum infrastructure was less than originally feared. A barrel of light crude settled at $64.25, down $1.59, on the New York Mercantile Exchange.

Large-cap stocks got a bounce after the Energy Information Administration, a division of the Department of Energy, said today that it sees U.S. retail gasoline prices falling to $2.58 a gallon in the fourth quarter. The administration also slashed its forecasts for growth in U.S. oil demand this year and next, saying higher costs would deter consumption.

Stocks moved in a narrow band, but trading was choppy as investors took each new piece of news and tried to parse the effects of Hurricane Katrina.

"To an extent, we're all just groping in the dark to make sense of all the news, all the stories, all the data," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank, adding that much of the data from prior months has been made obsolete by last week. "What are the ripple effects? What will the costs be on a cost front, a delivery front and a psychology front?"

The Dow Jones industrial average rose 44.26, or 0.42 percent, to 10,633.50. Yesterday, the Dow rose 141.87, its best one-day gain since July 8.

Broader stock indicators were slightly higher. The Standard & Poor's 500 index rose 2.97, or 0.24 percent, to 1,236.36, and the Nasdaq composite index rose 5.17, or 0.24 percent, to 2,172.03.

Bonds continued the previous session's sell-off, with the yield on the 10-year Treasury note rising to 4.14 percent from 4.09 percent late yesterday. The dollar was mixed against other major currencies. Gold prices fell.

The S&P 500 and Nasdaq composite fell in morning trading after the Department of Labor revised second quarter productivity growth down to a 1.8 percent annual rate instead of the 2.2 percent in a preliminary report. The department also reported an increase in labor costs to 2.5 percent from the 1.3 percent in its preliminary report.

Higher wages are one of the indicators of inflation the Federal Reserve will weigh as it considers its interest rate policy. Traders had hoped the Fed would end its year-plus march of short-term interest rate hikes after Hurricane Katrina and softer economic data released last week, but increased wages could signal a continuation of the rate hikes.

A speech by Chicago Federal Reserve President Michael Moskow saying the Fed "will take appropriate monetary policies to keep inflation well contained" was also a blow to traders waiting for rate hikes to end.

In company news, Kerr-McGee Corp. shares rose $1.37 to $90.27 after it said its deepwater oil facilities in the central and western gulf are producing at pre-hurricane levels. Inspections and repair of minor damage to the eastern gulf shelf operations still shut continues, officials said. Starting up remaining production will depend on reopening onshore terminals, gas processing facilities and pipelines.

Boston Scientific Corp. fell $1.95 to $24.26 after it said its third-quarter earnings and revenue will fall short of its expectations. The warning sent the medical device maker's shares down to their lowest level in more than two years.

Shares in Albertson's Inc., the nation's second-largest supermarket chain, fell 27 cents to $23.13 after it said its second-quarter earnings edged up 3 percent from last year, missing Wall Street's expectations. The company, which last week said it was considering putting itself up for sale, reaffirmed guidance for the full year that was in line with analyst targets.

Declining issues led advancers by roughly 8 to 7 on the New York Stock Exchange where preliminary consolidated volume was 2.05 billion, up from 1.93 billion for the same period yesterday.

The Russell 2000 index of smaller companies rose 2.84, or 0.42 percent, to 677.32.

Overseas, Japan's Nikkei stock average rose 0.06 percent. Britain's FTSE 100 rose 0.13 percent, Germany's DAX index rose 0.40 percent, and France's CAC-40 rose 0.30 percent.