Stocks Soar on Renewed Hopes of a Speedy Victory
Stocks soared Wednesday, lifting the Dow Jones industrial average 215 points and building on Tuesday’s rally, as progress by U.S.-led troops in Iraq reignited hopes for a short war.
Oil prices plunged more than a dollar a barrel, gold sank and Treasury bond yields rose as coalition forces neared the Iraqi capital in their campaign to oust President Saddam Hussein.
“The mood among investors has improved substantially,” said Alfred Goldman, chief market strategist at A.G. Edwards & Sons in St. Louis. “People are beginning to feel that the war will be over in a matter of weeks, not months.”
The Dow industrials surged 215.20 points, or 2.7%, to 8,285.06; the broader Standard & Poor’s 500 index climbed 22.42 points, or 2.6%, to 880.90; and the technology-dominated Nasdaq composite rose 48.42 points, or 3.6%, to 1,396.72.
Volume was heavy as winners swamped losers by about 5 to 2 on the New York Stock Exchange and Nasdaq.
After losing a total of 529 points since March 21, the Dow now has recovered 292 points in two days.
News that a division of Iraq’s Republican Guard was crushed and that missing U.S. soldier Jessica Lynch was rescued after 10 days in captivity fueled the air of optimism on Wall Street.
“The rescue of the POW was a feel-good thing for everyone -- troops and investors,” said Scott Jacobson, strategist at brokerage Jefferies & Co. in New York.
Investors ignored weak economic data from the manufacturing sector, where a report showed factory orders falling more steeply than expected in February. When the report came out at midmorning, “the market didn’t even sneeze, it just kept going up,” Goldman said.
In recent weeks, the stock market has become largely a “daily opinion poll” on the progress of the war, strategists said.
“The psychological impact of the war on businesses and consumers can tip the economy either way, at least for the short term,” said Jeff Van Harte, manager of the Transamerica Premier Equity fund in San Francisco. Because of that focus, the market may face continued volatility, he cautioned.
Indeed, if definitive news such as Hussein’s death or a regime change in Iraq is announced, the Dow could jump 500 to 800 points in a day, Jacobson said.
However, he added, stocks also remain susceptible to a steep sell-off in the event of bad news -- for instance, if the U.S. military “gets bogged down by guerrilla fighting” in Baghdad.
“If you want to know where the market’s headed, turn on Fox News or CNN,” Jacobson said.
The market’s usual focus on first-quarter earnings, which most companies will announce later this month, may be overwhelmed this year by war developments, strategists said.
“Companies have a lot of cover. They can blame any shortfall on the war, and some of them may be reluctant to issue forecasts,” Jacobson said.
Analysts said Wednesday’s rally was boosted by so-called short covering. Traders with “short,” or bearish, bets in place often boost rallies by scrambling to buy stock to limit their losses or lock in gains.
In a short sale, a trader sells borrowed shares, hoping to buy them back later at a lower price and pocket the difference.
In commodity trading, meanwhile, crude oil futures fell $1.22 to $28.56 a barrel in New York as traders bet the war would end without seriously disrupting Mideast exports. Also, a new report showed a jump in U.S. crude inventories as rising production by Saudi Arabia and other OPEC producers boosted supplies.
Gold, which has served as a haven for war-wary investors, slid $4.70 to $329.60 an ounce.
Some investors shifted assets out of the Treasury market and into stocks, sending bond prices down and their yields up. The yield on the benchmark 10-year T-note surged to 3.93% from 3.81% on Tuesday.
In currency trading, the U.S. dollar strengthened against the euro and the Japanese yen.
Among Wednesday’s other highlights:
* Industrial stocks rallied on optimism that a quick war might fuel long-delayed purchases of capital equipment. Winners included Deere, up $2.05 to $41.49; Caterpillar, up $2.06 to $51.71; Eaton, up $3.25 to $74.51; and Superior Industries International, up $1.88 to $38.38.
* Chip and networking stocks also gained on hopes for an economic pickup. Intel rose $1.10 to $17.52, Texas Instruments surged $1.14 to $17.58, KLA-Tencor leaped $2.15 to $38.34 and Adtran was up $2.50 to $39.45. The Sox chip stock index jumped 6.3% as all 17 of its members rose.
But AT&T; lost 49 cents to $15.89 on a downgrade by brokerage Goldman Sachs.
* In the financial sector, Citigroup added $1.44 to $37.04; Bank of America rose $1.82 to $69.82; and J.P. Morgan Chase advanced 88 cents to $25.11.
* Tobacco stocks bounced back a bit from their recent drop, including Philip Morris’ parent, Altria Group, up $1.55 to $29.65, and R.J. Reynolds Tobacco Holdings, up $1.85 to $32.38.
* European markets were sharply higher, with indexes rising 5.7% in Germany, 4.1% in France and 1.9% in Britain.
* Oil-related stocks sank with crude prices. BP fell $1.23 to $38.40, Apache lost 75 cents to $61.31 and Valero Energy slid 96 cents to $40.92.
Gold stocks were weak as well, including Newmont Mining, down 67 cents to $25.21, and ASA, off 91 cents to $33.35.
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Rally leaders
Here are some of the stocks that paced Wednesday’s rally and that are up sharply since Jan. 1:
*--* Pctg change: Stock Wed YTD Ryland Group +5.3% +39.7% Fluor +3.8 +28.2 Amgen +2.1 +23.6 Veritas +7.4 +20.9 United Online +9.1 +21.1 Best Buy +4.8 +18.7 Caterpillar +4.2 +13.1 Intel +6.7 +12.5 Walt Disney +5.1 +10.2 Wal-Mart +3.2 +7.1 S&P; 500 index +2.6 +0.1
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Source: Bloomberg News
