Stocks Edge Higher on War News
Stocks resumed their upward march Tuesday as President Bush’s prediction that U.S.-led troops will prevail in Iraq spurred buying in the aftermath of Monday’s sharp decline.
But the market gave back much of its early rally on news that the Senate voted to reduce Bush’s tax-cut plan by half.
The Dow Jones industrial average finished with a gain of 65.55 points, or 0.8%, at 8,280.23.
The Nasdaq composite index rose 21.23 points, or 1.6%, to 1,391.01.
Winners outnumbered losers by more than 2 to 1 on the New York Stock Exchange and by 3 to 2 on Nasdaq, though volume was well below last week’s peaks.
In other markets Tuesday, oil prices pulled back and Treasury bond yields eased.
Stocks slumped Monday, with the Dow falling more than 307 points, after an eight-session rally that had carried the index up nearly 1,000 points. Weekend reports of rising casualties among coalition forces gave some investors an excuse to take profits, analysts said.
On Tuesday, buyers returned, encouraged by Bush’s comments and by rumors of a civilian uprising against Saddam Hussein’s forces in southern Iraq.
“The news coming out of Iraq was constructive, and the market responded,” said Philip Orlando, chief investment officer at Value Line Asset Management in New York.
Kevin Marder, L.A.-based strategist at Ladenburg Thalmann Asset Management, said traders were enthused by a possible uprising in the city of Basra. “The report caught everyone’s attention. If true, it might spread to other areas of Iraq,” he said.
The rally lost much of its steam, however, immediately after the Senate unexpectedly voted to slash Bush’s proposed $726-billion tax-cut plan to about $350 billion.
The Dow had been up 123 points before the vote. The gain dwindled to about 20 points before buyers jumped back in late in the session.
Bush’s plan calls for a total tax exemption for corporate dividend income, a step Wall Street believes would make stocks more appealing. News of the proposal had spurred a strong rally in share prices early in January.
The Senate’s vote throws the dividend plan into doubt, some experts said. But they also noted that negotiations on the president’s economic stimulus plan would continue in Congress.
Tuesday’s rally came even though the day’s economic news wasn’t encouraging: Consumer confidence fell for a fourth straight month in March, a private research group said.
But analysts said investors shrugged off that report. The market will be driven by Middle East headlines for the foreseeable future, they said.
“We can strip away all the corporate earnings and economic data points,” Orlando said. “People are focusing on bomb damage, reports of casualties and the overall progress of the war effort.”
Some analysts said they are encouraged that growth-oriented stocks -- rather than conservative names -- have been leading the rally since March 12. The trend indicates that investors are less averse to risk than they had been, Marder said.
Whole Foods Market, for example, climbed $1.61 on Tuesday to a new high of $58.11. In the Internet sector, EBay added $1.15 to $88.70 and Yahoo gained 27 cents to $23.62.
Among Tuesday’s market highlights:
* Crude oil futures declined on hopes that Iraq’s oil fields will remain largely undamaged. Near-term futures in New York slid 69 cents to $27.97 a barrel after rising $1.75 Monday.
* Treasury bond yields were higher for much of the session as stocks rallied and some investors sold bonds for stocks. Yields pulled back late in the day as stocks faded following the Senate vote on Bush’s tax plan.
The 10-year T-note ended at 3.94%, down from 3.97% Monday.
* European stock markets rallied ahead of Wall Street, notching gains of 3.4% in Germany, 2.5% in France and 0.5% in Britain.
* Dow index stocks leading the advance included Home Depot, up 73 cents to $25.11; Wal-Mart Stores, up 95 cents to $53.47; Alcoa, up 50 cents to 21.33; and J.P. Morgan Chase, up 51 cents to $24.14.
But American Express fell $1.09 to $35.26 after Merrill Lynch analysts trimmed their 2003 profit forecast for the charge-card giant, saying the war will prompt businesses to slow their travel spending.
* UnumProvident surged $1.58 to $9.91. The disability insurer resolved a regulatory review of its junk-bond holdings, clearing the way for the Securities and Exchange Commission to approve the firm’s plan to sell shares and shore up its capital.
* Drug stocks were strong. Eli Lilly gained $1.44 to $58.14, Pfizer jumped $1.01 to $32 and Pharmacia was up $1.34 to $44.35. Many HMO shares also rallied, including WellPoint Health, up $2.25 to $75.25.
* Battered airline stocks rose after Senate Majority Leader Bill Frist (R-Tenn.) said the industry will get aid from Congress. American Airlines parent AMR rose 17 cents to $2.25, Northwest Airlines gained 72 cents to $8.08 and Delta Air Lines climbed 29 cents to $9.81.
Also, JetBlue Airways rose 66 cents to $28.61. Brokerage Bear Stearns initiated coverage of the stock with an “outperform” rating.
Market Roundup, C7-8