- The Washington Times - Saturday, December 21, 2002

NEW YORK (AP) Stocks surged yesterday as investors shrugged off worries about a war with Iraq and drew some optimism from Federal Reserve Chairman Alan Greenspan's latest assessment of the economy. The three main indexes posted a weekly gain to snap a two-week losing streak.

Analysts said many investors were looking to pick up bargains after three days of declines. News that financial brokerages had reached a settlement on conflict-of-interest charges and that Senate Republican leader Trent Lott resigned his leadership post added to the good mood.

"The fewer of those types of things people have to worry about, the more people can focus on the fact that the economic news is not all that bad and the prospects for the stock market in 2003 are pretty good," said Scott Wren, equity strategist for A.G. Edwards & Sons.

The Dow Jones Industrial Average climbed 146.52, or 1.8 percent, to close at 8,511.32. In the previous three sessions, blue chips had fallen 262 points, to their lowest level in nearly six weeks.

The broader market also finished higher. The Nasdaq Composite Index rose 8.96, or 0.7 percent, to 1,363.06. The Standard & Poor's 500 Index gained 11.51, or 1.3 percent, to 895.76.

For the week, the Dow rose 0.9 percent, while the Nasdaq edged up 0.1 percent and the S&P 500 gained 0.7 percent.

Mr. Greenspan told the Economic Club of New York late Thursday that since the Fed's last rate cut Nov. 6, there is some evidence that the "U.S. economy has been working its way through a soft patch." He added that the United States faces no immediate threat of deflation.

Meanwhile, the Commerce Department reported yesterday that the U.S. economy posted a solid growth rate of 4 percent in the third quarter, unchanged from the estimate made a month ago, even as worries persist about just how much the economy is weakening.

And 10 of the nation's largest brokerages, including Citigroup and Goldman Sachs, agreed to pay about $1.4 billion to resolve conflict-of-interest accusations in one of the largest settlements ever with securities regulators.

That helped lift financial-sector stocks, with Citigroup rising $1.14, to $38.14, and Morgan Stanley jumping $1.74 to $42.04.

Analysts say investors have been hesitant to commit to stocks in recent weeks, particularly amid escalating rhetoric about a war with Iraq. On Thursday, the United States declared Iraq in "material breach" of a U.N. disarmament resolution.

In addition, some investors are still looking to cash in some gains from the blue chips' eight-week surge in the autumn and are not certain whether Wall Street can stage its traditional holiday rally in the final two weeks of December.

"I think it will be an upward trending market here," said Kevin Gaughan, portfolio manager and equity strategist at Strong Financial Corp. in Milwaukee. "The investment math of our business has been on our side recently. The earnings numbers are better.

"This week, we had some pockets of good news and that's helped," he said.

News of Mr. Lott's resignation helped boost stocks yesterday. Mr. Lott said he would step down as majority leader as many of colleagues began backing Tennessee Sen. Bill Frist for the post. Mr. Lott plans to remain a senator.

Analysts said investors believed the departure of Mr. Lott, who has been criticized for racially insensitive comments, would allow the Republican-controlled Congress to move forward on business-friendly initiatives such as tax cuts.

"The guy had become a liability to the Republican Party, and therefore the president's agenda," Mr. Wren said. "They need to focus on an economic stimulus."

Nike climbed $3.57, to $45.10, after it said profit grew 18 percent in the second quarter on strong international sales.

But Halliburton fell 42 cents, to $19.08, after it said the Securities and Exchange Commission had formalized its investigation of the company's accounting practices.

Trading was brisk as Wall Street worked through its first quadruple-witching session, the quarterly expiration of index futures and options, as well as individual stock futures and options.

Advancing issues outnumbered decliners more than 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, a barometer of smaller-company stocks, rose 3.47, or 0.9 percent, to 386.88.

Overseas, Japan's Nikkei stock average finished 0.2 percent higher yesterday. In Europe, France's CAC-40 climbed 0.9 percent, Britain's FTSE 100 rose 1.3 percent and Germany's DAX index gained 2.1 percent.

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