Stocks surge on war news

Dow climbs 215 points

Nasdaq up 48, or 3.59%

Hope amid continuing worries

Some look at earnings, and don't see a bull market

April 03, 2003|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Positive news on the war front, including the rescue of an American prisoner of war, lifted Wall Street spirits and stock prices yesterday. The Dow Jones industrial average gained 215 points.

"The market the last four or five weeks has just been trading on the war news, and so spirits kind of ebb and flow as the news over them comes in better or worse," said David Straus, a senior portfolio manager with Johnston Lemon Asset Management in Washington.

The Dow closed up 215.20 at 8,285.06, a gain of 2.67 percent. It was the largest advance since March 21, when the index of 30 blue-chip stocks closed 235 points higher.

Broader market indicators posted their sharpest gains since March 17. The technology-filled Nasdaq composite index jumped 48.42 points, or 3.59 percent, to 1,396.72. Standard & Poor's 500 index, a broader measure of market performance, surged 22.42, or 2.61 percent, to 880.90.

Buoying stock prices yesterday was news that coalition forces had rescued American POW Pfc. Jessica Lynch from an Iraqi hospital. Saddam Hussein also failed to address his nation in a televised speech Tuesday night, fueling rumors that he had been killed or had fled the country. And U.S. forces have advanced toward Baghdad, while Iraq's elite Republican Guard has been weakened.

"This has given investors the confidence that we are probably going to see the war end sooner rather than later," said Gil Knight, money manager for Allied Investment Advisors in Baltimore.

The market has been on a seesaw ride, rising and falling with each new rumor in the 2-week-old war.

The Dow started the week with its fourth consecutive losing day, falling 153.64 on Monday over concerns that fighting would be prolonged. The next day, the Dow rebounded 77.73 points.

"We will see a lot of volatility as long as people are focused on this war," said Douglas Ober, chairman and chief executive of Adams Express Co. in Baltimore.

Once the war is over, or settled to the point that there won't be any military surprises, investors will be able to focus on the economy, experts said. Then investors will decide whether it was the war or economic problems that have held stock prices back.

"The economy is weak, but not as weak as the market would have you believe," said Morry Zolet, senior vice president with Smith Barney's Lutherville office. Zolet said some investors are already returning to the market, not wanting to miss out on the next bull run.

"They are realizing that interest rates are three-quarters of 1 percent and are looking for opportunities besides cash," he said.

Margaret Jones, chief executive of Whittlinger Capital Management in Minneapolis, also said the economy is in better shape than it has been given credit for.

Businesses are beginning to spend money on updating plants and equipment, and that will only increase once the war is over, Jones said. Unemployment isn't rampant; wages have risen modestly; and interest rates remain low, she said.

"Low interest rates are like a gift from the gods," she said. "It's money in people's pockets."

Others are less optimistic.

While an end to the war might brighten consumer sentiment and make companies more willing to spend money, projected corporate earnings don't seem to be strong enough to support higher stock prices, said Johnston Lemon's Straus.

"The recovery has slowed down," he said.

Also, mortgage refinancings have put more money into the hands of consumers, who have kept the economy going, Straus said. But refinancing is likely to taper off, and there may not be a reason for consumers to step up spending, he said.

Ober said there's a very good possibility that the economy may slip into another recession.

"The stimulus plan seems to be bogged down in Congress," he said. "It's already been chopped in half."

Elsewhere on the broad market yesterday, the Russell 2000 index, a benchmark of small-cap stocks, rose 7.61, or 2.1 percent, to 376.30, and the Wilshire 5000 total market index jumped 206.39, or 2.5 percent, to 8,348.77.

Based on the Wilshire's change, the market value of U.S. stocks increased by $247.67 billion.

The Sun-Bloomberg index of the top stocks in Maryland gained 1.89 to 347.07.

Advancing issues outnumbered decliners 3-to-1 on the New York Stock Exchange. Volume increased to 1.60 billion shares from Tuesday's 1.47 billion.

Intel Corp., the world's largest maker of computer chips, added $1.10 to $17.52. International Business Machines Corp., the top computer company, rose $2.73 to $81.46. Microsoft Corp., the biggest software company, gained $1.37 to $25.72.

Overture Services Inc., whose service charges Web sites to appear in search results, fell $1.74 to $13.49. Microsoft, which accounted for a third of Overture's fourth-quarter sales, is preparing its own paid-search service.

Computer Sciences Corp. plunged $3.89 to $28.52 after a Sanford C. Bernstein & Co. analyst questioned the way Computer Sciences accounted for its operating costs.

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