Stock Rally Fizzles
Stocks pulled back from strong gains earlier in the session to close slightly higher Monday. Prices surged after U.S. troops and tanks rolled through central Baghdad, encountering sporadic resistance. But news that U.S. forces near Baghdad found a weapons cache of around 20 medium-range missiles equipped with potent chemical weapons helped put a lid on the advance, according to Standard & Poor's MarketScope.
The Dow Jones industrial average finished up 23.26 points, or 0.25%, to 8,300.41. The blue-chip average was up over 200 points earlier in the session. The tech-heavy Nasdaq composite index climbed 6 points, or 0.5%, to 1,389.51. The broader Standard & Poor's 500-stock index gained 1.3 points, or 1%, to 878.47.
"Equities should be able to sustain recent strength if war developments stay favorable and economic expectations soon revive," says a note from The Bank Credit Analyst.
The last few days of fighting in and around the Iraq capital have given the U.S. more confidence that Saddam Hussein's regime will soon be toppled and that justification for the war -- the suspected weapons of mass destruction -- will in fact be found.
In Hindiyah, a mobile Army nuclear, biological and chemical detection laboratory confirmed evidence of sarin nerve gas, Knight Ridder newspapers reported. This could be the "smoking gun," said an Army information officer. U.S. soldiers reportedly found the suspect chemicals in an agricultural warehouse containing 55-gallon chemical drums. A number of soldiers and non-combatants underwent decontamination after exhibiting symptoms of possible exposure to nerve gas.
War remains the market's primary focus, with investors trying to make sense of good and bad news. U.S. forces are now reporting that the Marines may have located illegal missiles tipped with sarin or mustard gas. In other developments, U.S. and British troops claim they may have killed so-called "Chemical Ali," a cousin of Saddam Hussein responsible for the country's military in the south of the country and the mastermind behind Saddam's chemical weapons programs. Thousands of Iraqi troops have been killed in and around the capital city over the last few days.
In corporate news, McDonald's (MCD ) announced details on its turnaround strategy. The nation's largest restaurant company said that it will cut capital spending and open fewer restaurants in 2003, in order to improve its sagging financial results. The company may raise its stock dividend too. An update from Dow industrials member Alcoa (AA ) after the market closed Friday started first-quarter earnings season on a positive note. The aluminum company reported earnings per share of 23 cents. Analysts were expecting fiscal first-quarter earnings per share of 21 cents, down from last year's 22 cents.
Other big-name companies are set to report earnings later this week include Abbott Labs (ABT ) and Constellation Brands (STZ ) on Wednesday, SunTrust (STI ) on Thursday, and General Electric (GE ) on Friday.
An influential analyst at Banc of America raised the outlook on Home Depot (HD ). And Morgan Stanley raised its rating on AOL Time Warner (AOL ), saying the worst is probably behind the company. Both stocks climbed on the news.
Airline shares climbed as crude oil for May delivery fell to $28.42 a barrel in New York. And companies facing product liability lawsuits rose after the U.S. Supreme Court set limits on punitive damages, striking down a $145 million award that State Farm Mutual Automobile Insurance Co. was told to pay a Utah couple in a dispute over an accident claim.
Treasuries started Monday's session sharply lower initially before a late recovery materialized, mostly in a mirror image of stocks, which ran out of steam after an early surge out of the gate.
More economic data are coming this week. Investors on Monday will get an update on February consumer credit later this afternoon. A report on February wholesale trade Tuesday will be followed by a mortgage applications update on Wednesday. On Thursday, investors will get the latest weekly jobless claims update and important prices data. Friday will bring the latest readings on the producer price index and retail sales.
European markets ended higher amid hopes that the end of the war in Iraq is approaching. In London, the Financial Times-Stock Exchange 100 index was up 121.40 points, or 3.18%, to 3,935.80. In Germany, the DAX added 154.87 points, or 5.84%, to 2,808.94. In France, the CAC 40 Index gained 97.72 points, or 3.44% to 2,935.68.
Asia markets finished up. In Tokyo, the Nikkei 225 index added 175.86 points, or 2.18%, to close at 8,249.98. In Hong Kong, the benchmark Hang Seng index gained 139.76 points, or 1.58%, to close at 8,962.21.