- The Washington Times - Tuesday, July 22, 2003

NEW YORK (AP) — Wall Street regained a positive track yesterday on news that four Iraqis were killed in a U.S. raid in Iraq. Investors were encouraged by news that two of Saddam Hussein’s sons were among the dead.

“The market is celebrating a bit,” said Arthur Hogan, chief market analyst at Jefferies & Co., explaining that “one of the major pieces of background noise [in the market] was the disappointment that we don’t have clear evidence of weapons of mass destruction or clear evidence that we have Saddam Hussein or any of his direct relatives.”

Lt. Gen. Ricardo Sanchez said at a news conference in Baghdad, “We are certain that [Saddams sons], Odai and Qusai, were killed today.”

After losing as much as 59.39 in early trading, the Dow Jones Industrial Average closed up 61.76, or 0.7 percent, at 9,158.45. On Monday, the Dow shed 91.46 points on disappointing earnings from Merck and Lexmark International.

The broader market, narrowly higher in earlier dealings, increased its advance. The Nasdaq Composite Index rose 24.69, or 1.5 percent, to 1,706.10. The Standard & Poor’s 500 index advanced 9.31, or 1 percent, to 988.11.

Still, analysts don’t expect the news from Iraq to have a lasting effect on Wall Street because investors’ primary focus remains second-quarter earnings.

“The geopolitical issues are still with us, but in the background. On a daily basis, it is about earnings,” Mr. Hogan said.

For the past two weeks, Wall Street has been alternating between rallies and sell-offs as most companies reported better-than-expected earnings, but failed to raise their estimates for the third and fourth quarters. Investors are questioning whether stocks, which had rallied since mid-March, climbed too high, too fast.

Since March 11, when the market hit lows for the year, the Nasdaq has climbed 34.2 percent, the Dow has gained 21.7 percent and the S&P; has advanced 23.4 percent. Analysts say many stocks are now priced at a premium, particularly given the fact that second-quarter earnings haven’t impressed investors the way first-quarter results did.

“Now, the focus is almost exclusively on the earnings coming out, whereas before there were some bargains to be had and you could ride that,” said Kevin Gaughan, portfolio manager and equity strategist at Strong Financial Corp. in Milwaukee. “You have seen some companies disappoint [investors] and some do quite well. The market is just reacting to that because the valuations are quite full.”

Chip makers and chip-equipment makers gave tech stocks a boost yesterday, after better-than-expected earnings released late Monday from Texas Instruments, and a string of upgrades within the sectors Tuesday from Lehman Brothers.

Texas Instruments climbed $1.37 to $19.25 and Novellus Systems advanced $1.76 to $36.31, each having been raised to “overweight” by Lehman.

Other gainers included Lexmark, which rose $3.95 to $63.35, recouping some of the $14.10 it lost Monday.

AmeriTrade advanced $1.17 to $9.42 on second-quarter profits that beat analysts’ forecast by 2 cents a share.

But Merck fell $2.01 to $57.81.

Advancing issues outnumbered decliners slightly more than four to three on the New York Stock Exchange. Trading volume was on the heavy side at 1.43 billion shares, up from Monday’s 1.23 billion.

The Russell 2000 index, the barometer of smaller-company stocks, rose 6.83, or 1.5 percent, to 464.00.

Overseas, Japan’s Nikkei stock average finished yesterday, down 0.4 percent. In Europe, Britain’s FTSE 100 rose 0.9 percent, France’s CAC-40 gained 0.4 percent and Germany’s DAX index advanced 1 percent.

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