Note that 5mm bolts, the size commonly used for accessory attachments on bikes (racks, water bottles, etc.) are generally interchangeable with SAE ("American" or "standard") size of 10-32. Your local hardware store is probably likely to have a wider variety of stainless bolts in 10-32. I prefer to use bolts with Phillips heads when possible over hex heads, as I've found over the years that the hex heads in some types of 5mm bolts can be easy to strip out. I got a box of stainless ones from my local small hardware store for something like 10 cents per bolt, whereas the metric ones were 5x the price.
To mount your rack/fenders on the cassette side of the rear dropout, I suggest removing the rear wheel, attaching the rack with a bolt that is long enough to engage all the threads, and then cut off any extra length of the bolt that protrudes beyond the eyelet. You can easily use a hacksaw (careful not to scratch the paint!), or mark the cut-off length, remove the bolt, and cut it to size using a tool like an electrician's crimper/stripper tool that has pre-threaded slots that make it easy to cut bolts to length (that's what I usually use). Throw some blu Loc-Tite on the bolt, too, to keep it from coming loose.