Stocks soar as war fears
fall
Reuters.com
October 01, 2002
NEW YORK (Reuters) - Stocks soared in a late comeback on
Tuesday, kicking off a fresh quarter on a bright note
as a deal between Iraq and the United Nations
took the edge off nagging war fears and helped lure
bargain-hungry investors back into the ravaged market.
"It's the first day of a new quarter. People are looking for
bargains," said Arnie Owen, managing director of capital markets
at Roth Capital Partners. "People are putting money to work."
U.N. and Iraqi negotiators said early in the afternoon that
Iraq agreed to a resumption of U.N. weapons inspections, with an
advance team of inspectors due in about two weeks. The deal
offered some relief to a market plagued by the uncertainty of a
potential U.S. strike to oust Iraqi leader Saddam Hussein.
The agreement, coupled with a handful of encouraging comments
from companies like mortgage giant Fannie Mae FNM.N and drug
company Forest Laboratories Inc. FRX.N , pulled in bargain
hunters eager to put their cash to work at the start of the
fourth quarter.
But skepticism dogged the rally a day after the blue-chip Dow
and the broad Standard & Poor's 500 suffered their biggest
quarterly drop since the crash of 1987. Traders noted the fragile
economy, weak corporate profits and the prospect of a war against
Iraq still overhang the market.
"The story coming out about Iraq making a possible deal with
the U.N. helped, but there's still no change in the fundamentals"
said James Volk, managing director of equity trading at D.A.
Davidson and Co.
The Dow Jones industrial average surged 346.86 points, or 4.57
percent, to 7,938.79, according to the latest available data,
scoring its biggest one-day percentage gain since July 29. All
thirty of the Dow components ticked higher. The blue-chip gauge
had hit its lowest close since August 1998 on Monday.
The Nasdaq composite index rallied 41.51 points, or 3.54
percent, at 1,213.57, after falling into negative ground earlier
in the day. The technology-loaded index had suffered its lowest
close since September 1996 on Monday.
The S&P 500 index climbed 32.64 points, or 4 percent, to
847.92. The broad market measure ended September with its biggest
one-month decline since 1998.
Winners beat out losers by a ratio of 11 to 5 on the New York
Stock Exchange and 6 to 5 on the Nasdaq. About 1.7 billion shares
changed hands on both the Big Board and on Nasdaq in moderate
trading.
The market had stumbled early in the session after a report
showed that U.S. manufacturing contracted slightly in September
for the first time in eight months. A string of weak economic
reports has spurred speculation that the Federal Reserve may fire
off another interest rate cut to help spur the fragile economic
recovery.
World oil prices rose toward 19-month highs as the threat of a
severe storm disruption to Gulf of Mexico oil and gas operations
plagued the market. Even news that Iraq agreed to a resumption of
U.N. weapons inspections failed to bring prices down far from
their peaks.
Exxon Mobil Corp. XOM.N , the largest publicly traded oil
company, rose $2.02, or more than 6 percent, to $33.92. Other
energy companies followed the upward trend. ChevronTexaco Corp.
CVX.N jumped $2.86, or more than 4 percent, to $72.11.
ConocoPhillips COP.N tacked on $1.87, or more than 4 percent, to
$48.11.
Technology heavyweights ticked higher after being pounded in
the third quarter. Web gear giant Cisco Systems Inc. CSCO.O rose
46 cents to $10.94, erasing earlier losses. Software titan
Microsoft Corp. MSFT.O moved into positive ground, up $2.49 at
$46.23. Intel Corp. INTC.O , the No. 1 computer chipmaker, was up
78 cents at $14.67.
Forest Laboratories surged $7.84, or more than 9 percent, to
$89.85. The drug company said it would significantly exceed
analysts' estimates for its fiscal second quarter because of
strong sales of antidepressant drugs.
Mortgage giant Fannie Mae jumped $5.68, or more than 9
percent, to $65.22 after saying its portfolio duration gap
narrowed. The duration gap, a measure of the mismatch of money
coming in and money going out, had widened as mortgage
refinancing soared, leading investors in Fannie Mae to worry
about a profit squeeze at the company.
Pepsi Bottling Group Inc. PBG.N rose $1.60, or more than 6
percent, to $25. The largest manufacturer of Pepsi-Cola drinks
said its third-quarter profit rose despite
lighter-than-anticipated volume in the United States and
Spain.
Sun Microsystems Inc. SUNW.O rose 17 cents to $2.76. In an
annual report filed on Monday, the computer maker revised upward
by more than threefold its reported fiscal fourth-quarter
earnings, saying costs were less than it had earlier
expected.
Aeropostale Inc. ARO.N sank $8.90, or more than 57 percent, to
$6.50. The youth-oriented apparel retailer after the close on
Monday slashed its profit outlook for the rest of the year as
mall traffic dwindles, forcing it to cut prices.
Investors managed to shake off weak economic data. The
Institute for Supply Management said its index of business
conditions in factories, the first major monthly read on the U.S.
economy, fell in September to 49.5 from 50.5 in both August and
July. The fall put the index just below the 50 mark, denoting
contraction in a sector that makes up roughly one-sixth of the
U.S. economy.
On Wall Street, October is known as the jinx month because of
market crashes in 1929 and 1987 as well as a big drop on Oct. 27,
1997, according to the Stock Trader's Almanac 2002.
But October can also be a "bear killer" and has turned the
tide in nine such declining markets since the end of World War
II, notes the Almanac.
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