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Market gains reflect ease of attacks
Compiled from Times wires
© St. Petersburg Times, NEW YORK -- Stocks rallied broadly Wednesday as investors showed signs of overcoming their initial nervousness after the American military strikes in Afghanistan. The gains were most pronounced in the stocks of economically sensitive companies, which had been falling as images of war raised concerns among investors that consumer spending would decline. After watching news coverage of the American air strikes for three days, "people are starting to get some level of comfort with the way we're handling it," said Stephen Massocca, president of Pacific Growth Equities, an investment bank in San Francisco. Still, he said, to the extent that investors' confidence is tied to success in the fight overseas and safety at home, "that's a very fragile hope out there." The Dow Jones Industrial Average closed up 188.42 at 9,240.86, a gain of 1,005 from its close of 8,235.81 on Sept. 21, the end of the first week of trading after the attacks. The blue-chip index had lost 1,369 points after the Sept. 11 terrorist attacks. Broader stock indicators also advanced. The Standard & Poor's 500 index gained 24.24 at 1,080.99, while the Nasdaq Composite Index rose 56.07 to 1,626.26. All three major indexes are now within striking distance of their pre-attack levels, but market watchers said it's too early to know if investors are feeling less worried about the weak economy and U.S. military action against terrorists or just bargain hunting. "The bullish scenario here is that people are pretty resilient and will adapt to this new world," said Robert Harrington, head of trading at UBS Warburg. "The bearish scenario is that if there's another terrorist event, the market will fall again." Some analysts said stocks now seemed likely to offer a better return than fixed-income securities, since short-term interest rates have fallen recently to the lowest point in decades. Some money managers may have been increasing the levels of stocks in their portfolios Wednesday at the expense of bonds, said Gemma Wright, director of market strategy at Barclays Capital in New York. But an increase in supply, caused by an auction of new government debt, put the most pressure on bond prices. The vexation for investors is that although short-term rates and stock prices have fallen, creating a stock market that some analysts call undervalued by historic measurements, no one knows the breadth or duration of the earnings recession. Right now, by one historic measurement, investors expect quarterly earnings by the companies of the S&P 500 stock index to decline about 30 percent. If they are to fall more, or to keep falling in subsequent quarters, stocks are not quite so undervalued. After the stock market closed Wednesday, Yahoo posted a loss and a larger-than-expected decline in its revenues, which mainly come from sales of online advertising. But the report seemed unlikely to weigh on the market today. The shares had gained 77 cents, to $10.93, before the company issued its report, and they rose 37 cents in after-hours trading. Among the stocks leading the Dow higher were Minnesota Mining and Manufacturing, up $3.40, to $101.84; General Motors, up $2.15, to $42.96; United Technologies, up $1.20, to $52.20, and International Paper, up $1.50, to $36.81. IBM, another Dow component, rose 11 cents, to $97.25, after Goldman, Sachs reduced its profit forecast for the company. Investors were looking for signs that the government's efforts to stimulate the economy -- through lower interest rates, spending and tax breaks -- will eventually bring comparably higher profits. And there were signs that investors believed stocks already have been pushed down farther than their earnings would justify, poor as those earnings may be. "The question with the market's recovery and profits recovery is not if, but when," said Charles Pradilla, chief investment strategist at SG Cowen, a securities firm. "We're not going to wait for the first turn in profits." In addition to Yahoo, another stock that rose despite a weak financial report was Motorola, which gained 19 cents, to $16.91. The company posted a third-quarter loss and said the drop in demand for telecommunications gear would cause it to post a loss for the year. The company also said it would cut 7,000 jobs. -- Information from the New York Times and Associated Press was used in this report.
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From the Times Business report
From the AP
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