A late afternoon turnaround, sparked by short covering and bargain hunting, led stocks into positive territory Tuesday. Major indexes had spent much of the session in the red, amid increasing geopolitical tension and a dismal consumer confidence measure.
The Dow Jones industrial average was up 51.26 points, or 0.65%, to 7,909.5. The broader Standard & Poor's 500-stock index picked up 5.97 points, or 0.72%, to 838.55. Meanwhile, the tech-laden Nasdaq composite index gained 6.6 points, or 0.5%, to 1,328.98.
"These bears are no pigs," says Bryan Piskorowski, market analyst at Prudential Securities, accounting for the afternoon runup. "The short-sellers finally succumbed to profit-taking [late in the session] -- what you saw was reversion to the mean." However, Piskorowski expects the gains to be short-lived going forward, as uncertainties about war and the economy persist. "The one thing this market has not shown is the ability to follow through," he says.
Concerns over Iraq and North Korea loomed over the trading session. On Tuesday, chief U.N. weapons inspector Hans Blix said Iraq had recently sent a handful of letters on weapons discoveries. Meantime, North Korea fired a test missile into the Sea of Japan.
The developments heightened anxiety a day after the U.S., Britain, and Spain submitted a draft resolution to the U.N. Security Council to declare Iraq has "failed to take the final opportunity" given it to disarm. France, Germany, and Russia submitted an alternate proposal that would set a step-by-step timetable for disarmament by Iraq. On Monday, Iraqi dictator Saddam Hussein reportedly rejected U.N. demands to destroy missiles and challenged President Bush to a television debate.
Tuesday's negative economic news added to the sour tone. The Conference Board's consumer confidence index fell from 78.8 in January to 64.0 in February, the lowest level since October, 1993 and much worse than expected. Heightened geopolitical risks, not to mention a sputtering economy and rising energy prices, are clearly weighing on consumers' assessment of conditions, according to economic research group MMS International.
In other economic news, existing home sales rose 3.0% to a record 6.09 million units in January. Economists had expected a decline. Though the figure indicated a strong housing market, it did little to sway investors Tuesday.
In corporate news, four former executives at Qwest Communications (Q) were indicted by U.S. prosecuters for improperly recognizing $33 million in revenue. Additionally, the Securities and Exchange Commission filed suit against the four, as well as four other current and former Qwest executives.
Shares in energy company El Paso (EP) jumped more than 10% Tuesday after it announced $1 billion in new financing. On Monday, El Paso sold its mid-continent natural gas reserves to Chesapeake Energy (CHK) for $500 million.
In earnings news, No. 1 home-improvement retailer Home Depot (HD) posted fourth-quarter profits of 30 cents a share. Analysts expected profits of 27 cents a share. Home Depot also said sales at stores open at least a year fell 6%.
After the closing bell, Hewlett-Packard (HPQ) reported earnings per share of 29 cents, exceeding the expected 27 cents per share.
The parent of Macy's and Bloomingdale's, Federated Department Stores (FD), reported fourth-quarter profits of $1.78 per share, compared with a loss last year. It also named chief operating officer Terry Lundgren as new CEO.
Clear Channel Communications (CCU), the largest radio station owner in the U.S., posted fourth-quarter earnings of 30 cents a share, vs. a loss in last year's fourth quarter.
Pork producer Smithfield (SFD) announced third-quarter profits of 5 cents a share, ahead of the forecasted 4 cents a share, but down from last year's EPS of 48 cents.
U.S. Treasury prices were higher Tuesday, but profit-taking and a late rally in stocks eased gains in late afternoon trading. Increasing political tension and the dour consumer confidence outlook led investors to the relative safety of government debt. The benchmark 10-year note's yield was 3.82%.
No significant economic data reports are expected Wednesday.
In Europe, stocks were trading lower. In London, stocks were pressured after insurer Prudential PLC (PUK) announced it would stop raising its dividend. The FTSE 100 index was down 80.3 points, or 2.17%, to 3,621.5.
In Paris, the CAC 40 index lost 102.24 points, or 3.67%, to 2,683.37. In Frankfurt, the DAX index fell 85.85 points, or 3.34%, to about 2,485.5.
In Asia, stocks ended lower. In Japan, the Nikkei 225 index fell 204.46 points, or 2.39%, to close at 8,360.49. Hong Kong's benchmark Hang Seng index fell 90.99 points, or 0.98%, to close at 9,148.48.