Stocks Rebound as Fears About War Are Eased
Stocks snapped a four-day losing streak Tuesday as investors looked past unexpectedly weak manufacturing data and bet that the war in Iraq may have taken a turn for the better for U.S.-led forces.
Upbeat news from American Airlines, which narrowly avoided filing for bankruptcy protection, helped lift the market.
Falling oil prices also brightened the outlook of traders, who worry about the effect of high energy prices on the U.S. economy.
Still, the mood was tempered by worries about the economic effect of a potentially protracted war in Iraq and about a batch of profit warnings, including those from home furnishings retailer Pier 1 Imports and aluminum producer Alcan.
The Dow Jones industrial average, up as much as 108 points early on, finished the day with a gain of 77.73 points, or 1%, at 8,069.86.
The Standard & Poor’s 500 index added 10.30 points, or 1.2%, to 858.48 and the technology-laden Nasdaq composite index rose 7.13 points, or 0.5%, to 1,348.30.
Advancers outnumbered decliners by more than 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq. Trading was active.
Investors took heart after a call from Saddam Hussein for Iraqis to fight a jihad, or holy war, against U.S.-led invaders was read on state television by Information Minister Mohammed Said Sahaf, renewing speculation that the Iraqi president may not have survived bombing raids.
“Saddam called for jihad, but he didn’t even show up for it,” said James Park, a trader at Brean Murray & Co. “The fact that he’s not there saying it casts doubt on if he’s even alive.”
American Airlines parent AMR surged nearly 43%, or 90 cents, to $3 and was among the NYSE’s most actively traded shares.
On Monday, AMR reached last-minute deals with its three major unions to cut costs to narrowly avert a bankruptcy filing, but analysts warned that there was still a chance it would file for Chapter 11.
On the economic front, the Institute for Supply Management on Tuesday reported that its closely watched manufacturing sector survey fell to a lower-than-expected 46.2 in March from 50.5 in February. The report came after a weak report on manufacturing in the Midwest that spooked the market Monday.
“The [economic] numbers that came out today were a little lighter than expected,” said Angel Mata, managing director of listed equity trading at Legg Mason Wood Walker.
But because of the war, Mata said, “we’re going to see some weakness in construction spending and the ISM index, so I don’t think they were as weak as maybe investors expected.”
Separately from the manufacturing report, the government said construction spending declined 0.2% in February. It was the first monthly decline since August but was still surprisingly strong as builders poured money into homes at a record level.
Lower oil prices provided hope that the economy might strengthen soon.
Crude oil futures retraced some of their recent gains partly on news that workers in Nigeria, the world’s eighth-largest oil exporter, called off a three-day strike set to begin Tuesday.
The near-month crude contract in New York slid $1.26 to $29.78 a barrel.
Among Tuesday’s highlights:
* Blue chips pacing the Dow’s gain included Citigroup, up $1.15 to $35.60; United Technologies, up $1.10 to $58.88; and SBC Communications, up $1.32 to $21. 38.
But Altria Group, the parent of Philip Morris, slumped $1.86 to $28.10 for its seventh straight decline. Some investors fear that Philip Morris could file for bankruptcy protection if forced to post a $12 billion bond in a recent health-liability court case.
Rival RJR Holdings tumbled $1.73 to $30.53 and British American Tobacco dropped 71 cents to $17.89.
* Earnings warnings provided a reminder that the first-quarter profit reporting season may be gloomy.
Pier 1 said its first-quarter and fiscal-year earnings would fall below estimates because the war in Iraq is cutting into sales. Its shares fell 77 cents to $15.09.
Citing unanticipated cost hikes the world’s No. 2 aluminum maker, Alcan, said its 2003 first-quarter profit would be at, or slightly below, the lower end of its guidance. Its shares fell 42 cents to $27.48.
* Concord EFS, which processes automated teller transactions, jumped $2.47, or 26.3%, to $11.87 after reports that it is in late-stage talks to be acquired by rival First Data for roughly $7 billion in stock. First Data sank $2.33 to $34.68.
* Reliant Resources surged 50 cents to $4.06. The power producer said it refinanced $5.9 billion in debt, a move analysts have said was necessary to avoid bankruptcy.
* Treasury bond yields rose at midday as some traders sold bonds to buy stocks after Hussein’s TV no-show. The 10-year T-note rose as high as 3.87%, but fell back to 3.81% by day’s end, compared with 3.8% Monday.
Market Roundup C7-9
