Dow Soars as Hopes Rise for Conflict’s End
Wall Street answered Friday’s imposing display of U.S. firepower in Iraq with a sharp stock market rally that drove the Dow Jones industrial average up more than 235 points, capping its biggest weekly gain in 20 years.
It was the eighth straight winning session for stocks, a run that has added nearly 1,000 points to the Dow and pushed it into positive territory for the year for the first time since late January. All but one of the Dow’s 30 blue-chip stocks posted gains Friday.
The rally reached into most sectors of the market -- oil services shares and precious- metals stocks were among the rare losers -- and came on the heaviest trading volume of the year on the New York Stock Exchange.
“They were buying anything and everything,” said Arthur Micheletti, chief investment strategist at Bailard, Biehl & Kaiser in San Mateo, Calif.
Traders, who until recently have been afraid to go into a weekend holding stocks, finished this week afraid to be caught short. With U.S. and British armored ground forces quickly advancing on a weakened Baghdad, “it could be over by Monday,” Micheletti said.
Indeed, the strategy that was working for investors just two weeks ago -- betting on higher oil and gold prices, a weak dollar and falling interest rates and stock prices -- continued to unravel Friday as the fear of war gave way to an expectation of a quick victory for U.S.-led forces.
The Dow closed up 235.37 points, or 2.8%, at 8,521.97, capping an eight-day gain of 997 points. The last time the index had eight winning days in a row was in December 1998.
The broader Standard & Poor’s 500 index rose 19.95 points, or 2.3%, to 895.79, and the Nasdaq composite index gained 19.07 points, or 1.4%, to 1,421.84. Winners led losers by more than 2 to 1 on the NYSE and by nearly 2 to 1 on Nasdaq.
Bond Yields Up
Meanwhile, Treasury bond yields jumped for the seventh day in a row, with the yield on the 10-year note -- a benchmark for mortgage rates -- climbing to 4.10% on Friday from 3.96% a day earlier. It was the first time since late January that the yield on the 10-year T-note, which stood at 3.56% on March 10, closed above 4%.
Gold prices fell again, losing $6.90 to $326 an ounce in New York as investors left behind the safe haven of hard assets.
And despite televised images of Iraqi oil wells burning, crude prices continued their recent collapse. The May contract for crude oil, which began trading Friday, fell $1.21 to $26.91 a barrel in New York. It was the lowest closing price since Dec. 4 and capped a 24% decline for the week -- the biggest since the 1991 Persian Gulf War. Oil futures closed at almost $38 a barrel March 12.
The Friday price drop came as U.S. and British forces gained control over a large portion of Iraqi oil fields and damage was reported as minimal, with fires at seven of hundreds of wells.
The dollar, meanwhile, hit a two-month high against the euro and a three-month high against the Japanese yen, reflecting optimism about the stock market and the war.
For the week, the Dow rose 8.4% for its biggest weekly gain since October 1982 -- the early days of the 1980s bull market. The S&P; 500 climbed 7.5%, and Nasdaq added 6%.
Year to date, the Nasdaq is up 6.5%, compared with 2.2% for the Dow and 1.8% for the S&P; 500.
Although war news dominated the market Friday, traders also may have had an eye on Washington, where the Senate overwhelmingly rejected a move by bipartisan moderates to reduce President Bush’s tax cut package by more than half.
The tax package, which would eliminate taxes on stock dividends and would speed up scheduled income tax cuts, is popular on Wall Street.
Investors shrugged off a disappointing report on inflation. The Labor Department reported that the consumer price index increased 0.6% in February, the largest rise in two years. That was twice as fast as January’s 0.3% advance.
Note of Caution
Even as Wall Street cheered, some observers said the speedy progress of the war and the sharp market rally could lead to a dose of sobriety afterward.
“There’s a sense that if this thing concludes fairly quickly, then we’ll have to think what to do next,” said David Blitzer, chief strategist for Standard & Poor’s. It may take “a few normal days” in the markets before analysts can figure out whether the advance of the last week would lead to something more sustained, he said.
In other highlights:
* Falling oil prices were a tonic for airline stocks, one of the market’s hardest-hit sectors this year. AMR, parent of American Airlines, gained 63 cents, or 36%, to $2.38; Delta Air Lines shares rose $2.43, or 28%, to $11.25; and Southwest Airlines added $1.04 to $15.28.
* Cyclical stocks, which tend to rise and fall with the economy, gained as investors bet that a quick resolution of the war would boost economic growth. All 30 members of the Morgan Stanley index of cyclical stocks rose as the index gained 4.5%, led by Goodyear Tire & Rubber, up 74 cents to $5.35, Sears, Roebuck, up $1.90 to $22.28, and Pactiv, which added $1.50 to $21.80.
* The day started with a big rally in Europe. Key indexes gained 4.2% in Germany, 3.4% in France and 2.5% in Britain. Japan’s financial markets were closed Friday for the first day of spring, a national holiday.
Market Roundup, C4-5
