- The Washington Times - Thursday, January 2, 2003

NEW YORK, Jan. 2 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market kicked off the year with a rally, ending sharply higher Thursday as investors shook off the gloom of 2002 and focused on a favorable reading on the manufacturing sector of the economy.

Markets had a difficult 2002 as the Dow industrials dropped nearly 17 percent for the year, while the Nasdaq Composite Index lost more than 31 percent for the year. It was the Dow's worst annual performance since 1977.

Larry Wachtel, senior vice president at Prudential Securities, said, "Weight falls, stocks rise. … That's the ticket for 2003."

The blue-chip Dow Jones industrial average, which added 8.78 points Tuesday, jumped 264.32 points to close at 8,606.35. The tech-heavy Nasdaq composite index, which slipped 4.03 points in the previous session, gained 49.34 points to close at 1,384.85.

The broader New York Stock Exchange composite index added 13.86 points to close at 486.71 while the Standard & Poor's 500 index added 29.16 points to close at 908.98.

The American Stock Exchange composite index gained 9.23 points to close at 833.61 while the Wilshire 5000 Index gained 257.21 points to close at 8,600.40.

Volume was 1.38 billion on the Big Board and 1.80 billion on the Nasdaq Stock Market.

Analysts said stocks started the new year strongly, with the Dow Jones Industrial Average surging almost 200 points after the Institute of Supply Management delivered a stronger than expected report on business activity. The Institute of Supply Management's index jumped 5.5 points to 54.7 in December from 49.2 percent in November.

Economists were expecting the index to improve to 50 percent during the month. The index has been under 50, signaling contraction, since September.

Norbert J. Ore, chairman of the Institute for Supply Management's

Manufacturing Business Survey Committee, said, "The manufacturing sector rebounded in December. The question at this point is whether the manufacturing sector can continue to gather momentum during the first quarter of 2003."

Analysts said the report helped to temper the downbeat tone of Tuesday's Conference Board Consumer Confidence Index, which declined to 80.3 in December from 84.9 in November, when an upward reading of 85.3 was expected.

Investors also shook the muck of a messy 2002 off their feet and greeted the new year with a Labor Department report showing the number of workers filing first-time applications for unemployment benefits rising by 13,000 to 402,000 in the week ended Dec. 30, compared with a drop of 60,000 in the week ended Dec. 21. Economists had expected an increase of 2,000.

The four-week-moving average of claims, which smoothes out weekly fluctuations, rose 11,250 to 418,750, its highest level in 13 weeks, after rising 2,500 a week earlier.

Meanwhile, the gurus were out in force with new year predictions, and Abby Cohen of Goldman Sachs is the major bull, projecting a 31 percent rise in the S&P; 500, while Carlos Asilis of J.P. Morgan is the major bear, suggesting a 9 percent drop for the S&P.;

"Our own Ed Yardeni sees a 25 percent gain in the S&P;, based on 3 percent GDP growth and a 13 percent increase in earnings. Ed says old fashioned investing will pay off with stocks that pay dividends and deliver reliable profit growth. He likes drugmakers, household products, beverages, home builders, and mortgage lenders," Wachtel said.

"Of course, everyone's caveat is the geopolitical situation, with the countdown on possible military operations in Iraq on the front burner. Beyond that, the debate centers around earnings progression, the timing of a capital spending revival, and the proper valuation to place in an environment of scant inflation, and a 40-year low in rates," Wachtel added.

On the corporate front, J.P. Morgan Chase & Co Inc. said a group of insurers agreed to pay the firm 60 percent, or $579 million, of almost $1 billion it claimed it was owed to cover losses on Enron-related financing deals, settling a lawsuit over the matter.

Analysts said a loss for J.P. Morgan would have been a huge financial blow for the lender. It has $965 million exposure on the deals, on top of an estimated $500 million it has already written off for Enron. The loss would be a big chunk of the $2.1-billion profit J.P. Morgan made over the first nine months of last year.

Meanwhile, U.S. Treasury prices sank almost 2 full basis points in reaction to the ISM report. The 10-year bond dropped 1 27/32 to 99 21/32. Its yield, which moves in the opposite direction of its price, jumped to 4.04 percent from 3.82 percent late Tuesday.

In Europe, stock prices ended higher in light post holiday trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index gained 52.1 points, or 1.3 percent, to 3,992.5. The German DAX index jumped 164.48 points, or 5.7 percent, to 3,057.11, and the French CAC-40 index gained 131.11 points, or 4.3 percent, to 3,195.02.

Analysts said European stocks pushed higher in light trading, bouncing back from steep losses in the last days before the new year. Insurance, banking and telecommunications issues helped buoy the markets.

Earlier in Asia, prices ended slightly higher in the first trading session of the new year on the Hong Kong Stock Exchange, lifted by strength in banks and technology issues.

Markets in Japan remained closed and will reopen Monday with the blue-chip Nikkei Stock Average hovering at 8,578.95 — its lowest year-end close since 1982. For the year, the Nikkei lost 18.6 percent of its value.

Hong Kong's blue-chip Hang Seng Index, which added 48.96 points during the previous session, rose 44.23 points, or 0.5 percent, to 9,365.52.

Analysts said trading activity was light at the start of the year with many players still on holiday. Concerns of a U.S.-led war on Iraq coupled with uncertainty about the U.S. economy also discouraged many investors.

Prices ended slightly higher on the South Korean Stock Exchange in quiet post-holiday trading. The Korean Composite Stock Price Index, or Kospi, which dropped 29.37 points Monday, added 7.62 points, or 1.2 percent, to 635.17. Markets in South Korea were closed on Tuesday for an extended holiday.

Analysts said shares rose as small investors accumulated issues that had recently fallen.

Prices ended higher on the Taiwan Stock Exchange. The Weighted Price Index, which slipped 5.30 points Tuesday, gained 72.42 points, or 1.6 percent, to 4,524.87 on buying by government-linked funds.

Meanwhile, prices ended lower on the Singapore Stock Exchange, pressured by concerns about whether the island state's economic growth can be sustained. The Straits Times Index lost 5.09 points, or 0.4 percent, to 1,335.98.

Elsewhere around the Pacific region, prices ended higher on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which rose 15.00 points during the previous session, gained 20.70 points, or 0.7 percent, to 2,996.20.

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