- The Washington Times - Friday, March 14, 2003

Stocks soared yesterday on hopes that the United States will peacefully settle its differences with allies over Iraq, with the Dow Jones Industrial Average gaining 270 points.
After weeks of drubbings on a steady drumbeat of news suggesting an impending war in the Middle East, stock investors took solace in a White House statement that it may put off action "to go the extra mile for diplomacy."
The softening also helped stoke stellar gains in the dollar and European stock markets, which had been treading at their lowest levels in six years. The news drove down prices for safe haven investments gold and Treasury bonds and deflated sky-high oil prices.
"With renewed prospects of peace, that is going to be bullish for U.S. assets," said Perry Parker, a foreign exchange trader at Deutsche Bank AG. "Talk of a war has triggered lower prices on U.S. assets; this is an unwinding of that."
After touching close to five-year lows earlier this week, the Dow yesterday shrugged off a report of dismal retail sales at U.S. stores yesterday and jumped 3.5 percent to 7,822. The Standard & Poor's 500 Index mirrored that gain, the largest since October for both indexes.
The technology-driven Nasdaq Composite Index skyrocketed 5 percent, or 62 points, to 1,341, erasing its 2003 losses. Both the Dow and S&P; remain down substantially for the year.
The rally was broad and deep, with three stocks rising for every one that fell on the New York Stock Exchange, and almost 1.8 billion shares trading hands.
White House spokesman Ari Fleischer said the president is seeking a "diplomatic solution" and the debate over Iraq in the United Nations "may continue" into next week. The United States had been pushing for a U.N. vote today on its resolution giving Iraq an ultimatum.
In another sign war may be delayed, Iraq said it will report to the United Nations today on the anthrax it says it destroyed 12 years ago, Agence France-Presse reported, citing unidentified diplomats in Baghdad. Iraq also is expected provide a second batch of documents on the whereabouts of its VX nerve gas in the next few days.
Some investors also took comfort in a Cable News Network report that the Central Intelligence Agency is in talks with Iraqi military leaders about surrendering in the event of an attack, suggesting any conflict in Iraq would be short-lived.
"It seems that war has been postponed for a period of another week or so, and we have some relief over that," said George Mairs, investment manager at Mairs & Power Inc.
Others on Wall Street said stocks were due for a rally after a battering in recent weeks that drove prices to bargain levels, while alternatives such as bonds looked expensive by comparison.
"I make the case that it's better today than any time in the last decade" to invest in stocks, said Robert Froehlich, chief investment officer of Scudder Investments.
He said business spending will pick up once the war is over, boosting profits and stock prices. He expects benchmark indexes by year's end may be as much as 15 percent above yesterday's levels.
Markets ignored darkening economic clouds seen in a report of plummeting retail sales last month from the Commerce Department. The 1.6 percent drop at stores and restaurants reflected widespread weakness brought on by a big East Coast snowstorm, a heightened terror alert, near-record energy prices and plunging consumer confidence during the month.
The economic news has been "ranging from bad to awful," said Joel Naroff of Naroff Economic Advisers. "We just didn't buy much last month, other than duct tape and plastic sheeting, of course."
The markets apparently are hoping for better times ahead, but "with Iraq still playing on peoples' minds, don't expect a major rebound in demand in March," Mr. Naroff said.
The report showed that sales of autos, particularly sport utility vehicles, plunged in the past two months as oil prices soared over $30 a barrel and approached record highs around $40. Yesterday, oil prices backtracked by 4.8 percent to $36 amid signs that a war may be averted.
"Suddenly, it's polka dots and moonbeams," said Larry Wachtel, market commentator with Prudential Securities, who noted that the stocks of most retailers took part in yesterday's market snapback despite abysmal sales.
Various technical factors fed into the rally, he said, including defensive plays by investors who had been betting against stocks, and a conviction among some analysts that the market was nearing a bottom.
Also, the managers of many big investment funds believe that positive news about Iraq might spark a big surge in the market, they jumped in so as not be to left behind, he said.
This article was based in part on wire service reports.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide