After another wild session, stocks Tuesday finished with solid gains, though well off the highs of the day, after news that President Bush ordered the Justice Department to obtain an 80-day court-ordered injunction in an effort to reopen West Coast loading docks.
On Monday, Bush created a board of inquiry into economic effects of the West Coast port lockout, now in its eighth day. Though the injunction will temporarily alleviate the backed up goods in those ports, players in the dispute will need to hammer out a long-term solution. The lockout -- which experts have estimated has been costing the economy $2 billion per day -- added pressure to the market.
Gains in Wal-Mart (WMT) and Target (TGT) helped the major indexes higher. The Dow Jones industrial average added 78.65 points, or 1.06%, to 7,501.49. The tech-heavy Nasdaq composite index rose 9.82 points, or 0.88%, to 1,129.22. And the broader Standard & Poor's 500-stock index gained 13.26 points, or 1.69%, to 798.53.
Despite the advance Tuesday, stocks are expected to remain under pressure amid concerns about the U.S. economy and corporate profits. Wall Street is also wading into a new earnings reporting season.
Several brand-name companies will report earnings Wednesday. Abbott Laboratories (ABT), Yum! Brands (YUM), Internet portal Yahoo! (YHOO) and SunTrust (STI) are due to report their third-quarter earnings reports.
Earlier, indications from President Bush's televised speech late Monday that a war with Iraq was not imminent or unavoidable, sparked some welcome buying. In a speech in Cincinnati last night, Bush vowed to build an international coalition against Saddam Hussein, should he not disarm.
The chief executive of General Motors (GM) expects that the U.S. auto market will contract in 2003, while a war with Iraq could put a dent in that projection.
The electric utilities group was under pressure in the wake of a plunge in Allegheny Energy (AYE) shares after the company said it was in default of credit agreements and was reducing earnings guidance. Shares of TXU (TXU) were also down sharply after resuming trading. In response to the stock price decline, the company said it is in a strong financial position and has ample liquidity. It also reaffirmed its 2002 and 2003 operating EPS guidance. Trading in TXU stock had been halted earlier in the session.
Among technology stocks, Cisco Systems (CSCO) fell for a fifth straight session as more analysts lowered estimates on the networking giant, whose business is suffering worldwide. Merrill Lynch and Bear Sterns cut fiscal first-quarter revenue and earnings targets and also lowered fiscal 2003 numbers.
In other corporate news, defense contractor Lockheed Martin (LMT) says it plans to buy back 23 million shares, or about 5% of total outstanding shares.
Schering-Plough (SGP)says that the Securities and Exchange Commission asked for information relating to its meetings with investors and other communications last week. A heavy sell-off prior to a warning from the company Friday has regulators questioning whether the drugmaker leaked the information to institutional investors.
Other major drug stocks were upgraded by investment bank Lehman Brothers. The analyst says the stocks are now at a bottom and new drug application filings coming soon improve the outlook for these companies. Merck (MRK), Pfizer (PFE), and Eli Lilly (LLY) benefitted from the upgrade.
Third-quarter earnings from soft-drink and snacks maker PepsiCo (PEP) came in at $0.56 per share, just above consensus forecasts. Wall Street had expected the company to post per share earnings of $0.55, compared with $0.49 a year ago.
U.S. Treasuries finished with gains despite the rebound in equities. Up next for economic data: on Thursday, import prices and wholesale prices. On Friday, investors will get a crucial read on the stamina of the American consumer -- September retail sales. Economists are forecasting a drop of 1%. Investors will also digest the September producer price index Friday.
European stocks finished lower. London's Financial Times Stock exchange index shed 50.40 points, or 1.33%, to 3,730.50. Germany's DAX index shed 45.30 points, or 1.70%, to 2,622.09, amid worries about Commerzbank. France's CAC index fell 39.33 points, or 1.44%, to 2,594.23.
Asia's stocks rebounded from heavy losses Monday though concerns about the Japan economy put a lid on the advance. Tokyo stocks added 20.90 points, or 0.24%, to 8,708.90. In Hong Kong, the Hang Seng Index added 46.01 points, or 0.52%, to 8,977.41.