Archive for Saturday, March 22, 2003

Stocks surge as war escalates

Dow posts best weekly performance since October 1982

March 22, 2003

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— Wall Street rallied in step with the escalating war on Iraq Friday, lifting the Dow Jones industrials 235 points to their strongest weekly gain in more than two decades.

The Dow and the Standard & Poor's 500 index notched their eighth straight day of gains -- the best performance in nearly six years for the S&P; 500 and in more than four years for the blue chips.

Trading was brisk as televisions flashed images of enormous explosions around Baghdad, part of the aerial bombardment known as "shock and awe" to reflect the goal of forcing Saddam Hussein to capitulate. Analysts said the developments fed investor confidence about a swift victory.

"Investors are relieved by the progress of the conflict in Iraq, which is better than many people believed," said Robert Streed, portfolio manager of Northern Trust Select Equity Fund in Chicago.

"There might be another issue going on as well -- the Dow and S&P; have now moved into positive territory for the year, and we're approaching the end of the quarter," he said. "So some portfolio managers who are not invested might feel a need to get money in the market."

The Dow closed up 235.37, or 2.8 percent, at 8,521.97, for an eight-day gain of 997 points. The last time blue-chip stocks had eight winning days was in December 1998.

The broader market also finished sharply higher. The S&P; 500 index rose 20.12 to 895.79, for an eight-day advance of 95 points. The last time the index posted eight days of gains was during June 1997.

The Nasdaq composite index gained 19.07 to 1,421.84, having risen in six of the past eight sessions.

For the week, the Dow gained 8.4 percent, its best performance since the week ended Oct. 8, 1982, when blue-chip stocks advanced 8.7 percent. The Nasdaq gained 6.1 percent this past week, and the S&P; rose 7.5 percent.

The sharp advance also put the Dow and S&P; back in positive territory for the year for the first time in weeks, with the blue chips ahead 2.2 percent and the S&P; up 1.8 percent. The Nasdaq has outpaced the other indexes and is now higher 6.5 percent for the year.

On Friday, the United States launched its long-awaited aerial attack, while U.S. and British ground forces swept through Iraq and took over important airfields. U.S. officials said hundreds of Iraqi soldiers surrendered and Iraq's command structure appeared to have disintegrated.

Stocks have surged in recent days on expectations of a brief and successful war, but analysts caution that the market could quickly reverse itself if the conflict is prolonged. They added that trading will likely be choppy as investors focus on the latest headlines.

Subodh Kumar, chief investment strategist for CIBC World Markets, said Wall Street's winning streak was encouraging, given its declines in recent months. Only after the situation with Iraq is resolved can businesses commit to capital spending needed to revitalize the economy, he said.

"If you have a fairly consistent recovery as we're having now, it may be a sign that the markets in its collective wisdom are forecasting a longer-term environment," Kumar said. "Until February, people have been obsessed with short-term risk. ... Now we may be seeing the reverse."

DuPont rose $2.04 to $41.64 after the chemical company reaffirmed its first-quarter outlook, citing strength in production agriculture and pharmaceuticals.

Micron Tech gained 88 cents to $8.88 after the chipmaker reported a wider fiscal second-quarter loss, but increased sales by more than 20 percent.

Palm fell 44 cents to $10.45 after the tech company had a quarterly net loss in line with analysts' expectations.

Intuit dropped $12.17 to $38.72 after the maker of TurboTax software lowered its full-year outlook, citing weak sales.

Investors shrugged off a disappointing government report on a major inflation gauge. The Labor Department reported that the Consumer Price Index increased by 0.6 percent in February, the largest rise in two years. That was twice as fast as January's 0.3 percent advance.

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