- The Washington Times - Monday, February 10, 2003

NEW YORK, Feb. 10 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market gained slightly Monday, encouraged by Iraq's agreement to allow U-2 surveillance planes to be part of the weapons inspections procedure.

The blue-chip Dow Jones industrial average gained 55.88 points, or 0.71 percent, to 7,920.11, having lost 65.07 points Friday. The tech-heavy Nasdaq composite index also rose 14.22 points, or 1.11 percent, at 1,296.69, having fallen 19.26 points in the previous session.

The broader New York Stock Exchange composite index gained 19.11 points to 4,732.77, while the Standard & Poor's 500 index rose 2.81 points to 406.29, and the American Stock Exchange composite index inched up 2.12 points to 813.95. The Wilshire 5000 Index rose 55.71 points to 7,929.13.

Big Board volume reached an estimated 1.23 billion shares, while Nasdaq volume was at 1.21 billion shares.

Investors were somewhat relieved by Iraq's agreement to allow the U-2 planes, but market eyes will nonetheless focus on Friday's U.N. meeting, when chief weapons inspector Hans Blix will update the Security Council on his team's latest findings.

On the home front, anticipation over Federal Reserve Chairman Alan Greenspan's semi-annual address to Congress beginning Tuesday, a dearth of economic data and the wind-down of the quarterly reporting season helped keep trading activity light and the geopolitical situation at center stage.

Analysts said stocks managed to open higher after four straight weeks of declines, but quickly turned south as geopolitical concerns remained at the forefront of investors' minds.

Concerns about a possible war with Iraq and tensions with North Korea have been weighing heavily on the market, leading to a heavy sell off over the past month.

On Monday, France, Germany and Belgium blocked NATO efforts to begin planning for possible Iraqi attacks against Turkey, which deepen divisions in the alliance over the U.S.-led push to oust President Saddam Hussein.

The Bush administration is entering a tough week of diplomacy over Iraq as it seeks to build support for taking military action to disarm Baghdad amid a mounting international campaign to win more time to search for weapons.

The United States says it is determined to resist all moves that would reduce pressure on Iraq and allow Hussein to wriggle free of his obligations under a 1991 cease-fire agreement that ended the Gulf War. There are signs that unless there is some radical change in Baghdad, the U.S. is prepared to go to war within weeks.

Terrorism concerns also have pressured the market. The Bush administration raised the national terror alert from yellow to orange on Friday, citing a U.S. intelligence warning of a high risk of a terrorist attack. The highest alert level is red.

Concerns about the economic effects of a possible war with Iraq led a panel of forecasters to trim their outlook for the nation's growth during 2003.

In the February issue of Blue Chip Economic Indicators, a closely watched newsletter, analysts projected the U.S. economy would expand 2.7 percent this year.

That forecast is scaled back from January's prediction of a 2.8 percent growth rate and marked the first time since last November the projection has been reduced.

In a summary of the economists' views, Blue Chip said the reduction in the forecast "reflects increased fears about the inevitability of a U.S.-Iraqi conflict and its attendant risks to the outlook."

The newsletter said both the financial markets and the economy would get a quick lift if a war with Iraq proved short-lived and yielded a swift victory for the United States.

"But given the likely need for a large occupational force after ousting the current Iraqi government, the costs and uncertainties of a prolonged U.S. presence in Iraq might continue to dog the U.S. economy, particularly if America and the United Kingdom go it alone," the report added.

Analysts also said Greenspan's main task when he goes before Congress on Tuesday will be to create optimism about the economy's direction in the face of possible war.

The central bank chairman offers his semi-annual assessment of economic prospects before the Senate Banking Committee and, a day later, crosses Capitol Hill to deliver what will likely be identical testimony to a House panel.

Grenspan's testimony always is hotly awaited by the financial markets and normally would set the tone for much of next week's trading activity.

Meanwhile, equity strategist Thomas McManus of Banc of America recommended a higher allocation of stocks in portfolios. His new ratio is 75 percent, up from 70 percent, based on "much improved" valuation and sentiment, along with recent economic data that was "not as bad as feared." McManus also lowered his bond allocation to 15 percent from 20 percent with the remaining 10 percent in cash.

Elsewhere, U.S. Treasury prices eased. The 10-year bond slipped 9/32 to 100 9/32. Its yield, which moves in the opposite direction of its price, inched up to 3.96 percent from 3.93 percent late Friday.

In Europe, stock prices ended slightly lower in London and Paris in lackluster trading, but gained slightly in Frankfurt. The London International Stock Exchange's blue-chip FTSE-100 index slipped 20.10 points, or 0.56 percent, to 3,579.10. But the German DAX index rose 16.75 points, or 0.65 percent, to 2,586.09 while the French CAC-40 index slipped 24.40 points, or 0.87 percent, to 2,772.26.

Analysts said stocks eased as investors opted to remain on the sidelines ahead of some key earnings reports due out later in the week and the widening issues in the international community over a possible war against Iraq.

In Asia, prices ended slightly higher in light pre-holiday trading on the Tokyo Stock Exchange, lifting in export-related issues. The blue-chip Nikkei Stock Average, which lost 36.03 points Friday, rose 36.77 points, or 0.4 percent, to 8,484.93. Markets in Tokyo will be closed on Tuesday for a national holiday.

Analysts said stocks inched higher as the U.S. dollar's strength on global currency markets buoyed export-related issues. The Japanese yen's weakness boosts the value of those exporters' overseas earnings when translated into local currency terms.

Prices also ended higher on the Hong Kong Stock Exchange, lifted by bouts of bargain hunting. The blue-chip Hang Seng Index, which added 24.80 points in the previous session, rose 81.19 points, or 0.9 percent, to 9,232.14.

Prices ended little changed in cautious trading on the South Korean Stock Exchange. The Korean Composite Stock Price Index, or Kospi, which lost 12.02 points during the previous session, eased 0.23 points to 577.25.

Stocks ended fractionally lower on the Singapore Stock Exchange in light trading. The Straits Times Index, which slipped 2.22 points during the previous session, slipped another 2.68 points, or 0.2 percent, to 1,282.73.

Prices also ended lower on the Taiwan Stock Exchange as the key Weighted Index, which sank 98.21 points during its previous session, lost another 91.50 points, or 1.9 percent, to 4,643.87.

Stocks also lost ground on the Australian Stock Exchange in light trading. The blue-chip All Ordinaries Index, which rose 17.90 points during the previous session, slipped 15.90 points, or 0.6 percent, to 2,870.20.

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