A late-day rally Wednesday saved the stock market from another negative session. The reversal was probably fueled by short-covering and some bargain hunting, notes Standard & Poor's MarketScope.
The markets remain sensitive to geopolitical headlines. On Wednesday, Britain laid out a list of six new terms for Iraq to avoid war. The second attempt for a new U.N. resolution is aimed at getting more support from Security Council members. "The markets are in a malaise as the waiting game over a potential war with Iraq continues," economic research outfit MMS International said.
The Dow Jones industrial average Wednesday climbed 28.01 points, or 0.37%, to 7,552.07. The broader Standard & Poor's 500-stock index finished up 3.46 points, or 0.43%, to 804.19. The tech-laden Nasdaq composite index gained 7.67 points, or 0.60%, to 1,279.14.
In economic news, a rare strong point in the economy still shows no sign of letting up. Fresh lows in mortgage rates spurred record numbers of Americans to apply to refinance their home loans last week, the Mortgage Bankers Association of America said. The number of refinancings filed last week reached its highest level (rising 34.9% from the previous week) since the MBA began the weekly survey in 1990. However, the year-over-year home purchase index is up only about 6%, a noticeable slowdown from the 10-20% average growth seen late last year, notes Moody's Investors Service.
Also, the U.S. trade deficit narrowed to $41.1 billion in January from a revised $44.9 billion in December, the government reported.
Uncertainties surrounding a potential U.S.-led war against Iraq continue to weigh on other components of the economy. Spare OPEC oil production capacity has been squeezed to just half the volume of Iraq's exports -- exposing world markets to shortages as a war with Iraq looms, the International Energy Agency said on Wednesday. Crude oil prices have risen to a 12-year high after an unexpected drop in U.S. inventories.
More key economic data releases will come Thursday and Friday. Initial jobless claims, February retail sales, and import prices will be due Thursday. On Friday, investors will get January business inventories data, February producer prices, industrial production, and preliminary figures for the University of Michigan Consumer sentiment survey for March.
"The last time U.S. individual investors were this negative on stocks was over a decade ago, in the midst of the build up to the Gulf War, when the economy was in recession, oil prices were surging and stock prices were swooning," said The Bank Credit Analyst. "Investors will remain very risk-averse until geopolitical tensions subside."
On Thursday, investors can expect earnings from Adobe Systems (ADBE), Borders Group (BGP), Petco (PETC), WebMD (HLTH), and Verity (VRTY), among other companies.
In corporate news Wednesday, several retailers reported earnings. Foot Locker (Z) results came in slightly lower than expected, while Sports Authority (TSA) reported higher fourth-quarter profits before the opening bell. AnnTaylor Stores (ANN) cut its first quarter profits forecast. Talbot's (TLB) reported earnings of 48 cents a share, vs. 53 cents in the year-earlier quarter.
Shares of AOL Time Warner (AOL) after The Washington Post reported that federal regulators have widened their accounting investigation of America Online.
Meanwhile, Ford Motor (F) shares rose 7.3% after UBS Warburg upgraded its rating on the automaker to 'neutral' from 'reduce'. The stock fell 5.6% Tuesday to $6.60 a share, its lowest level in a decade.
Likewise, Boeing (BA), McDonald's (MCD), and Philip Morris, recently renamed Altria Group (MO), all are at or near 52-week lows.
In technology, Intel (INTC), the world's largest computer microprocessor maker, launched a set of chips on Wednesday that promise to make wireless Internet access a standard feature on laptops within a year -- changing the habits of computer users. The shares were up 2.5%.
Black Box, (BBOX), the software maker, plunged nearly 32% as the company said it expected lower than expected sales and earnings.
The government is considering action against Schering-Plough (SGP), a drug company which can't seem to avoid negative news, following reports that Schering's CEO violated the new rules on selective disclosure of company information to certain investors.
On the accounting reform front, the Financial Accounting Standards Board will vote today whether to overhaul guidelines governing stock options, moving closer to a standard that would force companies to treat options given to employees as a salary expense.
Airline shareholders got a mix of news good and bad. Standard & Poor's will remove AMR (AMR) the parent company of American Airlines, from the S&P 500 index because of its low market capitalization and price per share. However, J.P. Morgan upgraded its rating on Delta Air Lines (DAL), citing its relatively strong financial position compared to rivals American and United Airlines parent UAL (UAL).
Treasuries recovered most of their lost ground by session end and the yield curve flattened. The yield on the 10-year note ended flat at 3.58% while the yield on the 30-year bond fell to 4.61% -- near its lowest levels in over four decades.
The European markets had another rough day as Alstom SA and Julius Baer Holding AG became the latest companies in the region to post record losses or cut dividends. In London, the Financial Times-Stock Exchange 100 index fell 165.70 points, or 4.8%, to 3,287, while the German and French markets slumped for the seventh straight day.
In Germany, the DAX index fell 102.34 points, or 4.44%, to 2,202.96, while France's CAC 40 index lost 90.38 points, or 3.62%, to 2,403.04.
Asian markets, however, climbed after two miserable days in the Japanese stock market. In Tokyo, the Nikkei 225 index climbed 80.61 points, or 1.03%, to close at 7,943.04. The Nikkei reached a 20-year low point earlier this week.
In Hong Kong, the benchmark Hang Seng index climbed 15.06 points, or 0.17%, to close at 8,874.99.