Markets & Stocks
Gains of New York
Stocks stage second day of gains, leading Nasdaq to erase 2003 losses, as peace hopes are ignited.
February 18, 2003: 5:55 PM EST
By Meghan Collins, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Stocks surged on light volume Tuesday as a glimmer of hope that the United Nations might be able to come up with a peaceful resolution to the Iraq crisis boosted investor confidence.

But whether the two day rally could extend itself to three has yet to be seen, as investors likely will consider more retail earnings reports and some data on the housing sector Wednesday.

The tech-laden Nasdaq composite (up 36.37 to 1346.54, Charts) led the pack, rising 2.8 percent to close the day back in the black for the year. The Nasdaq started the year at 1,335.51 -- about 11 points lower than it ended the day.

Meanwhile, the Dow Jones industrial average (up 132.35 to 8041.15, Charts) rose 1.7 and the S&P 500 index (up 16.28 to 851.17, Charts) logged a 1.9 percent rise for the day. All three indexes also made gains Friday; the markets were closed in observance of the Presidents' Day holiday Monday.

Volume was light, however, as many traders failed to make it to work after a major snowstorm blanketed the East Coast and brought transportation to a near-standstill.

"I think the weather is going to be a big concern," said James Park, senior trader at Brean Murray & Co. "The markets are definitely continuing their rally, but volume is extremely light. Liquidity is more of an issue."

Park said he expects volume to remain muted at least until Thursday.

Still, those investors who did get to work clung to hope of peace in the broiling tensions with Iraq.

In a statement Tuesday, President Bush said that while he believes Iraq President Saddam Hussein is in violation of the original U.N. resolution on weapons of mass destruction, he would make an effort to work with other United Nations members to come up with a second resolution.

"It's a great day in the neighborhood," said Ned Riley, chief investment strategist at State Street Global Advisors. "You've got a continuation of a feeling of less pessimism of the United States' possible multipronged alienation of the world. I do think we can mend some of the fences and prepare for less confrontation after Iraq ... then we'll get some of that war discount out of the market."

Wall Street's rally began Friday, when chief U.N. weapons inspector Hans Blix delivered his latest update on Iraq to the United Nations Security Council. His report said his team of inspectors found no sign of any weapons of mass destruction in Iraq, but that they also couldn't say with certainty that all such weapons had been destroyed or declared to the United Nations, as required under U.N. resolutions.

Still, Blix's report made war, which had seemed all but imminent before Friday, less likely, at least in the immediate future. This led to buying that left the stock market with a weekly gain for the first time in five weeks. The market was closed Monday for Presidents' Day, but the buying continued when stocks resumed trading Tuesday.

Blix's stance, as well as massive anti-war protests in Europe and the United States over the weekend, could help push the Bush administration to try to secure international support and U.N. backing before leading a possible attack on Iraq.

Whether the rally will continue into Wednesday has yet to be seen, but positive news from one retailer after the bell, on top of gains made by several retailers Tuesday, could help.

Clothing retailer Abercrombie & Fitch (ANF: up $0.84 to $27.82, Research, Estimates) reported fourth-quarter earnings of 93 cents a share, beating analyst estimates by 3 cents a share. The company also reiterated guidance that is a penny lower than Wall Street forecasts.

Investors also will get a dose of economic news focused on the housing industry before the bell.

Economists expect housing starts for January to come in at 1.765 million, down from 1.835 million in December, according to a consensus surveyed by Wall Street also forecasts building permits to have dropped to 1.800 million in January from 1.887 million in December.

Retailers get a boost, defense takes a hit

There was little in the way of corporate news to stir much action in particular stocks.

Shares of Wal-Mart (WMT: down $0.07 to $49.08, Research, Estimates) turned back into the red after rising throughout the day after the world's largest retailer reported fiscal fourth-quarter earnings that topped expectations, but revenue that missed forecast slightly. The prospect for retailers remains sluggish at best, as is the U.S. economy, and the weekend snow storm in the East could have a negative impact on retailers' results for the current quarter.

Shares of other retailers also rose despite the snow worries. Federated Department Stores (FD: up $0.66 to $25.92, Research, Estimates), said it met the company's sales targets, while J.C. Penney (JCP: up $0.78 to $19.50, Research, Estimates) sales came in slightly above plan in the first two weeks of February.

Traders said investors would be looking for reports on Presidents Day sales after the storm. But they also said that sales of lingerie over Valentine's Day week and duct tape, due fears of a biological or chemical attack against Americans after the government raised the national terrorist alert level to "high risk" last week, likely boosted sales.

Meanwhile several defense stocks hit new 52-week lows as investors focused on the possibility that war might be avoided, or postponed. Shares of L-3 Communications (LLL: down $1.85 to $37.35, Research, Estimates) fell more than 5 percent, while Lockheed Martin (LMT: down $0.60 to $46.80, Research, Estimates) shares slipped 2 percent and DRS Technologies (DRS: down $0.70 to $24.00, Research, Estimates) shares lost about 3 percent.

Overseas, European markets ended the day mostly higher. Asian markets closed mostly lower.

U.S. Treasury bonds rose, with the benchmark 10-year note gained 13/32 of a point in price for a yield of 3.94 percent. The dollar fell sharply against the yen but was a bit higher against the euro.

Light crude oil for April delivery rose 15 cents to $35.51 a barrel. Gold for April delivery fell $7.90 an ounce to $344.30.

Market breadth was decidedly positive. On the New York Stock Exchange, advancers beat decliners 12 to 5 as 1.1 billion shares changed hands. On the Nasdaq, gainers beat decliners 2 to 1 as 1.2 billion shares changed hands.  Top of page

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