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The Honolulu Advertiser
Posted on: Friday, March 14, 2003

It's high time as markets rally

By Josh Friedman
Los Angeles Times

Stocks soared yesterday, lifting the Dow 269 points and sending all three major U.S. indexes to their biggest one-day gains since October, as traders pounced on speculation that the Iraqi crisis might be resolved soon.

While rain came down on Wall Street yesterday, the stock indexes went up. But despite the rally, the Dow and S&P 500 were below their levels at the end of February.

Bloomberg News Service

Oil and gold prices fell and Treasury yields surged as investors piled out of bonds and into stocks. Europe's stocks markets rallied even more strongly than Wall Street.

Analysts were quick, however, to question whether Wall Street's rally of the last two days has staying power. They noted that the specter of war with Iraq has not gone away and numerous other recent market advances have fizzled after a day or two.

"There doesn't seem to be any substantial reason for the turnaround of the last two days. It's just rumor, innuendo and fumes," said Philip Dow, equity strategist at the RBC Dain Rauscher brokerage.

"Of course, it's welcome nonetheless."

Among blue-chip indexes, the Dow Jones industrial average surged 269.68 points, or 3.6 percent, to 7,821.75. The Standard & Poor's 500 index climbed 27.71 points, or 3.5 percent, to 831.90.

The technology-heavy Nasdaq composite rocketed 61.54 points, or 4.8 percent, to 1,340.78.

Winners topped losers by nearly 3 to 1 on the New York Stock Exchange and Nasdaq. Volume was the heaviest this year.

As investors embraced stocks, they dumped "safe haven" investments that soared in recent weeks as war fears rattled world markets.

In trading in New York, crude oil fell $1.82 a barrel to $36.01 and gold plunged $10.60 an ounce to $335.90. On the Treasury market, the yield on the benchmark 10-year T-note spiked to 3.75 percent from Wednesday's close of 3.58 percent — its biggest one-day jump since the first week of January.

And the dollar, which has struggled this year, scored its strongest one-day gains against the euro and yen in two months.

White House spokesman Ari Fleischer said U.N discussions on finding a way for Iraq to disarm peacefully could continue into next week, allaying fears of imminent war among some investors.

Traders also pointed to a CNN report late Wednesday that certain Iraqi military units may have begun secret talks with the United States to set the stage for the Iraqi forces to surrender if war did break out.

Still, underscoring the uncertainty of events in the Middle East, Secretary of State Colin Powell's testimony yesterday at a congressional hearing carried hints that the United States is prepared to go it alone in its confrontation with Iraq.

Wall Street pros said so-called short covering by hedge funds and individuals helped turbo-charge yesterday's stock gains. Short sellers — who sell borrowed stock, hoping to buy it back later at a lower price, pocketing the difference — scrambled to cover their positions and limit losses or lock in profits by purchasing shares.

"The day's rally smacked of short covering," said Will Muggia, manager of the Touchstone Emerging Growth fund.

Even with yesterday's gains, the Dow and the S&P 500 are below where they were at the end of February.