Updated from 4:05 p.m. EST
Stocks staged a remarkable recovery Tuesday, with all three major averages reversing big losses from earlier in the day to end the session higher.
Dow Jones Industrial Average
ended up 51 points, or 0.7%, at 7909, while the
rose 6 points, or 0.5%, to 1329. The
gained 6 points, or 0.7%, to 838. The Dow had been down 139 points earlier, while the Nasdaq had been down more than 2%.
"There's been no real catalyst" for the turnaround, said Peter Blatchford, a trader at Miller Tabak & Co. "Things just got so bad and we held the lows." Blatchford said a reversal in crude oil futures was likely one positive influence on the market. April crude oil futures fell 42 cents to $36.06 a barrel after being sharply higher earlier in the day. The U.S. government said it is ready to release oil from the strategic petroleum reserve if war with Iraq breaks out.
Other traders said hedge funds were responsible for the rally and that institutional buying prompted a short squeeze. Rumors that Saddam Hussein would destroy banned missiles as the U.N. has requested may have also added to the bullish tone, though the rumors couldn't be confirmed.
Volume on the
hit 1.48 billion, with advancers beating decliners by about 18 to 13. On the Nasdaq, 1.4 billion shares changed hands, with winners outpacing losers by about 16 to 15.
Earlier in the day, stocks had sold off sharply on concerns about the economy and possible war with Iraq. The Conference Board's consumer confidence index fell to 64 in February, a level not seen since October 1993 and well below economists' expectations for a reading of 77. In January, the index came in at a revised 78.8.
"This month's confidence readings paint a gloomy picture of current economic conditions, with no apparent rebound on the short-term horizon," said Lynn Franco, director of the Conference Board's Research Center. Franco said weak labor and financial markets, rising fuel costs and worries about war and terrorism "appear to have taken a toll on consumers." On Monday, Saddam Hussein told
that his missiles do not violate U.N. mandates and said he has no plans to destroy them. He also said he expects an invasion soon and is prepared for it.
The U.N. is analyzing two opposing resolutions it received Monday, one from the U.S. and the U.K. that would pave the way for war, and another from France, Germany and Russia that would give U.N. inspectors more time to work in Iraq. Events in North Korea added to the nervous tone Tuesday after it test-fired missiles into the Sea of Japan at the same time South Korea was inaugurating its new president.
"As long as the Iraq situation remains unresolved, I think we'll maintain a downside bias," said Brian Pears, head of equity trading at Victory Capital Management.
Still, the housing market remains a key source of strength in the economy. Existing home sales rose 3% in January to an annual rate of 6.09 million. Economists expected home sales to fall to 5.80 million, from 5.86 million in December. Separately, the Redbook report of retail sales for the week ending Feb. 22 showed chain stores fell 2.6% compared with the same week a year ago.
the world's largest home-improvement retailer, reported a decline in its fourth-quarter profit to $686 million, or 30 cents a share, from $710 million, or 30 cents a share, a year earlier. The results topped Wall Street expectations, and shares rose 3% to $22.98.
Also from the retail sector,
topped estimates for its fourth-quarter earnings. The parent of Macy's and Bloomingdales reported earnings of $1.99 per share, 4 cents better than expected. Federated rose 3% to $25.54.
rose 2% to $18.18 ahead of the firm's earnings due after the bell. The company recently reported a fourth quarter profit of 24 cents a share, or 29 cents on a non-GAAP basis. Analysts sponsored by Thomson Financial First Call were looking for a 28-cent profit. HPQ ended the session up 2% to $18.18.
Treasuries were higher, with the 10-year note up 10/32 to yield 3.81%. The dollar was trading lower against the euro and yen.
Overseas markets were lower, with London's FTSE 100 off 2% to 3621 and Germany's Xetra DAX down almost 4% to 2471. In Asia, Japan's Nikkei shed 2.4% to close at 8360, while Hong Kong's Hang Seng lost 1% to end at 9148.