LONDON (ShareCast) - US stocks closed higher as oil prices fell sharply again after inventory figures showed stocks of petrol rising.

Crude currently costs around $124 a barrel, down by $3 on the day and $23 per barrel in just over two weeks. News that Hurricane Dolly is on course to miss the key oil installations in the Gulf of Mexico aided the slide in prices.

Crude-oil inventories for the week ended 18 July fell by 1.6m barrels to 295.3m barrels, according to the Energy Department's weekly report, better than expected.

Dow Jones closed up 29 at 11,632. Nasdaq rose 21 points to 2,325. The S&P 500 was up 5 points at 1,282.

President Bush also cheered the markets by dropping his opposition to a huge bailout of the US mortgage industry.

The new Housing Bill gives the US government the power to step in and shore up mortgage guarantee firms Freddie Mac and Fannie Mae if necessary. It can also underwrite up to $300bn of refinanced mortgages and provide $3.9bn to help communities hit worst by the housing collapse.

Elsewhere, a strong performance in Europe and the sale of its minority interest in UK sandwich chain Pret A Manger helped fast food chain McDonald's break into profit during the second quarter. Net income for the three months to 30 June was $1.19bn, versus a loss of $711.7m.

Second quarter earnings include a 10 cents per share gain from the sale of the 33% stake in Pret for £345m ($673m at the time) earlier this year. Global comparable sales increased 6.1% and by 3.4% in the US where operating income increased 6%. But business boomed across Europe, with sales up 7.4% and operating income up 29%.

Costco Wholesale said Wednesday fourth-quarter and full-year profit will miss Wall Street expectations. Earnings per share in the three month to 31 August are expected to be ‘well below’ the current consensus estimate of $1.00 per share. Costco said that full-year profits in its gasoline operations will fall, while merchandise profits will be lower. The company will also take a higher than expected inventories charge.

After the close, Amazon.com posted a 102% rise in second quarter profits to $158m.In other results, household appliances maker Whirlpool posted a 27% drop in second quarter profits, while Boeing reported second-quarter earnings that fell 19%.

Late Tuesday, thrift bank Washington Mutual also revealed a $3.3bn quarterly loss, far worse than expected and reflecting an $3.7bn increase in its bad debt charge.

Also after the close, Yahoo! said it missed second quarter forecasts. Yahoo! saw quarterly net income fall 18% to $131m, or 9c per share, from $161m a year ago.

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