- The Washington Times - Friday, February 21, 2003

NEW YORK, Feb. 21 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market soared Friday as investors digested a tame reading on inflation and comments from Defense Secretary Donald Rumsfeld that American and British troops are ready to go to war.

The blue-chip Dow Jones industrial average rose 102.80 points, or 1.30 percent, to close at 8,017.76, having lost 85.64 points Thursday. The tech-heavy Nasdaq composite index gained 17.76 points, or 1.33 percent, to 1,348.99, after losing 3.09 points in the previous session.

The broader New York Stock Exchange composite index gained 56.17 points to 4,787.01, the Standard & Poor's 500 index rose 11.13 points to 848.23, the American Stock Exchange composite index increased by 9.84 points to 826.83 and the Wilshire 5000 Index gained 105.47 to 8,037.08.

Big Board volume reached an estimated 1.37 billion shares, while Nasdaq volume was at an estimated 1.32 billion shares.

Stocks bounced around in a very narrow trading range as investors opted for the sidelines ahead of the weekend, with the global political situation remaining unresolved and the health of the U.S. economy questionable. Stocks were lifted by some bouts of bargain hunting.

Larry Wachtel, senior vice president at Prudential Securities, said, "T.G.I.F. It has not exactly been polka dots and moonbeams on Wall Street this week, as volume fades and prices ooze.

"The front page of USA Today says the new Iraqi war target is mid-March, as logistics and diplomatic maneuvering push the timetable. And except for periodic oversold flurries, the bias is south by southwest," Wachtel added.

News that inflation at the consumer level remained negligible in January, despite a huge jump in producer prices in the same month, did little to dispel the reluctance among investors to commit to the market.

The producer price index on Thursday posted its largest gain in 13 years, but apparently producers were unable to pass on the costs on to consumers and the all urban consumer price index, a key measure of inflation at the retail level, rose just 0.3 percent in January, lifted by the highest energy costs in nine months. The core index, which excludes food and energy items, rose 0.1 percent.

Economists on Wall Street were expecting the CPI to rise 0.3 percent while the core rate was expected to rise 0.2 percent.

On Thursday, the Labor Department reported the PPI, a key measure of inflation at the wholesale level, posted its largest increase during January in 13 years as the cost of oil skyrocketed. The government agency reported the PPI surged 1.6 percent during the first month of 2003 — its largest rise since climbing a 1.9 percent back in January 1990. Excluding the often volatile food and energy sectors, the so-called core PPI jumped 0.9 percent.

The latest report on the CPI showed energy prices surged 4 percent —their largest gain since April of last year. Heating oil costs jumped 8.6 percent and natural gas prices were the highest in two years.

There was fresh news on the war front for investors to mull over. Thursday night Defense Secretary Donald Rumsfeld said U.S. and U.K. troops in the Persian Gulf are ready to go to war. This was in contrast with the popular perception that a couple more weeks are needed to put needed forces in place.

Analysts noted Wall Street is worried that uncertainty about Iraq has crimped companies' investment and consumer spending and caused company executives to refrain from making earnings forecasts.

Also, war fears have pushed up oil prices, adding to companies' costs. And, Merrill Lynch raised its 2003 price forecast on oil to $28.50 a barrel from $24 and $26.50 for brent crude from $22.50.

"Fundamentals, Not Iraq, support our outlook," energy analysts Steve Pfeifer and Mike Rothman said in a note to clients. "Our higher 2003 oil price forecast is driven by the very large inventory deficit and our projections that inventories will remain well below normal through 2003."

A key difference between today and the 1991 Gulf War is that inventories are now 123 million barrels below normal compared to 125 million barrels above normal prior to Iraq's invasion of Kuwait, they noted.

Meanwhile, U.S. Treasury prices were little changed. The 10-year bond eased 5/32 to 99 29/32. Its yield, which moves in the opposite direction of its price, inched up to 3.88 percent from 3.87 percent.

Analysts said Treasury prices were flat on concerns over a war with Iraq and the consumer price report, which helped to quell inflation fears.

In Europe, stock prices ended higher in all major European bourses. The London International Stock Exchange's blue-chip FTSE-100 index gained 39.90 points, or 1.08 percent, to 3,727.10, while the German DAX index rose 57.61 points, or 2.22 percent, to 2,648.87 and the French CAC-40 index rose 25.34 points, or 0.9 percent, to 2,829.83.

In Asia, prices ended lower for the fourth consecutive session on the Tokyo Stock Exchange as the yen's strength combined with selling by corporate pension funds to push blue-chip stocks lower. The blue-chip Nikkei Stock Average, which lost 27.52 points during the previous session, fell 137.38 points, or 1.6 percent, to 8,513.54. The Nikkei has dropped 258.35 points over the past four sessions.

Analysts said on the heels of weak economic reports out of the United States on Thursday and rising oil prices, broad-based selling drove the market lower on the day, as players squared positions ahead of the meeting of Group of Seven finance officials in Paris from Friday.

Stocks were also pressured as the Japanese yen's strength on global currency markets combined with continued selling by corporate pension funds to push stocks lower.

Stocks also ended lower on the Hong Kong Stock Exchange. The blue-chip Hang Seng Index, which lost 37.15 points in the previous session, fell 139.62 points, or 1.5 percent, to 9250.86.

Prices also ended lower on the Taiwan Stock Exchange, pressured by uncertainties about Iraq and the global economy. The key Weighted Price Index of the Taiwan Stock Exchange, which eased 0.13 point in the previous session, slipped 2.35 points to 4,548.35.

Prices also ended lower on the South Korean Stock Exchange, pressured by Thursday's performance on Wall Street. The Korea Composite Stock Price Index, or Kospi, which rose 4.68 points during the previous session, slipped 1.91 points, or 0.3 percent, to 603.60.

Prices ended slightly higher in light pre-weekend trading on the Singapore Stock Exchange. The Straits Times Index, which slipped 3.12 points during the previous session, added 2.62 points, or 0.2 percent, to 1,315.03.

Elsewhere, prices ended slightly lower in moderate trading on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which dropped 43.40 points during the previous session, eased 2.10 points to 2,804.40.

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