Stocks Jump on Speculation That Iraq Crisis Might End Soon
Stocks soared Thursday, lifting the Dow almost 270 points and sending all three major U.S. indexes to their biggest one-day gains since October, as traders pounced on speculation that a resolution of the Iraqi crisis might be near.
Oil and gold prices plunged and Treasury yields surged as investors piled out of bonds and into stocks. Stock markets rallied in Europe even more strongly than in the U.S., and in Japan, stocks were up more than 2% in early trading today.
But analysts were quick to question whether Wall Street’s rally of the last two days has staying power. They noted that a war with Iraq was still a distinct possibility and that numerous other recent advances on Wall Street have fizzled after a day or two.
“There doesn’t seem to be any substantial reason for the turnaround of the last two days. It’s just rumor, innuendo and fumes,” said Philip Dow, equity strategist at brokerage RBC Dain Rauscher.
“Of course, it’s welcome nonetheless.”
Among blue-chip indexes, the Dow Jones industrial average surged 269.68 points, or 3.6%, to 7,821.75, and the Standard & Poor’s 500 index climbed 27.71 points, or 3.5%, to 831.90. The technology-heavy Nasdaq composite, meanwhile, rocketed 61.53 points, or 4.8%, to 1,340.77.
Winners topped losers by nearly 3 to 1 on the New York Stock Exchange and Nasdaq. Volume was the heaviest this year.
As investors embraced stocks, they dumped “safe haven” investments that had soared in recent weeks as war fears rattled world markets.
In trading in New York, gold plunged $10.60 an ounce to $335.90. On the Treasury market, the yield on the benchmark 10-year T-note spiked to 3.75% from Wednesday’s close of 3.58% -- its biggest one-day jump since the first week of January. Oil prices also fell, with crude losing $1.82 a barrel to $36.01 in New York. Meanwhile, the dollar, which has struggled this year, scored its strongest one-day gains against the euro and yen in two months.
White House spokesman Ari Fleischer said United Nations talks on finding a way to disarm Iraq peacefully could continue into next week, allaying fears of war among some investors.
Traders also pointed to news reports late Wednesday that Iraqi officials may have secretly begun surrender talks with the U.S. in the event of war.
Still, underscoring the dilemma investors face in trying to anticipate the course of events in the Middle East, comments by Secretary of State Colin L. Powell at a congressional hearing Thursday hinted that the U.S. is prepared to move against Iraq without U.N. backing.
Wall Street pros said so-called short covering by hedge funds and individuals helped turbocharge Thursday’s stock gains. Short sellers -- who sell borrowed stock, hoping to buy it back later at a lower price, pocketing the difference -- scrambled to cover their positions and limit losses or lock in profits by purchasing shares.
“The day’s rally smacked of short covering,” said Will Muggia, manager of the Touchstone Emerging Growth fund.
Bob Streed, manager of the Northern Select Equity fund in Chicago, said it was logical for buyers to step in this week after key market indexes approached the multiyear lows they reached in July and October.
“But,” he said, “the longevity and strength still is not there.”
Even with Thursday’s gains, the Dow and the S&P; 500 are below where they were at the end of February.
In other highlights:
* The day kicked off with rallies in Europe, where indexes zoomed 6.9% in Germany, 6.3% in France and 6.1% in Britain.
* Big tech names lifted the Nasdaq 100 index to a 6% gain. Intel, which unveiled a new chip for wireless products, rose $1.15 to $17.35; Microsoft rallied $1.28 to $24.67; and Applied Materials gained 91 cents to $12.66.
Blue-chip winners included Walt Disney, up $1.02 to $16.20; Caterpillar, up $2.71 to $46.93; and General Motors, up $1.97 to $32.60.
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Market Roundup, C4-5
