Updated from 4:15 p.m. EST
Stocks ended moderately higher Tuesday amid reports that Saddam Hussein was losing control of Iraq's second-largest city. But a vote in the Senate to slash President Bush's stimulus plan took some wind out of an afternoon rally.
Dow Jones Industrial Average
ended up 65 points, or 0.8%, at 8280, while the
gained 21 points, or 1.6%, to end at 1391. The
climbed 10 points, or 1.2%, to 875.
The Dow was up as much as 100 points following unconfirmed reports that a popular uprising against Hussein was under way in Basra, heightening hopes that the ruler could be toppled soon. British troops were said to be surrounding the city. Meanwhile, Secretary of Defense Donald Rumsfeld said war "is much closer to the beginning than to the end," although he reiterated that victory isn't in doubt. U.S. troops continued their march toward Baghdad, piling up arms and ammunition in preparation for an assult on the Iraqi capital.
Bush said that the U.S.-led coalition will prevail over Iraq and that the "regime will be disarmed, creating a safer world." He also unveiled his supplemental budget request for $75 billion to be used for military action and the reconstruction of Iraq.
The Basra-related gains were reduced in the session's final hour after the Senate voted 51 to 49 to cut Bush's proposed $728 million tax reduction in half. The surprise reversal occurred after Republican Lincoln Chafee and Democrat Ernest Hollings changed their votes.
"The tax proposal, which would eliminate taxes on corporate dividends, was construed as big positive for stocks since it made them more attractive. So even though this will mean a smaller budget deficit, the fact that the proposal was not fully approved was seen as a negative sign by the market," said Daniel Morgan, fund manager and market analyst at Noble Financial Group.
Michael Mach, vice president and portfolio manager at Eaton Vance, money-management firm, noted, "Trading is focused on what will happen in the next few hours. It's mainly speculative, based on options programs and daytrading. Right now, all this uncertainty has created some select opportunities in the stock market and we're trying to ferret out and capture these opportunities."
Stocks were coming off a brutal session in which the Dow tumbled 307 points to 8214. The plunge erased Friday's rally and left the average holding roughly 850 points of gains since hitting lows two weeks ago.
Among other assets, crude oil for May delivery fell 69 cents to $27.97 a barrel in New York, reversing earlier gains. The 10-year Treasury note gained 3/32 to yield 3.95%. The dollar remained weaker against the euro and yen.
Energy shares gained during the session, with
moving up 1.5% to $35.83 and
( RD) gaining 3% to $41.12.
"Everyone is so focused on the war effort and not enough on market data that it just creates more opportunity to buy," said Martin McKeever at Merrill Lynch's Equity Trading Retirement Group. McKeever believes once war cools down, consumer confidence could get a boost.
James Melcher, president of money-management firm Balestra Capital, was more skeptical. "Investors were overreacting in the past few sessions. There's nothing you can trade or pin your hopes on. Any mild advance or setback sends markets every which way."
Trading volume was light, with 1.3 billion shares changing hands on the New York Stock Exchange and advancers ahead of decliners by almost three-to-one. On the Nasdaq, about 1.4 billion shares were traded, with gainers outpacing losers by two to one.
Two economic reports released Tuesday had little effect on market activity. The Conference Board's consumer confidence index fell to 62.5, the lowest in almost a decade amid a soft job market and higher gasoline prices. Economists had expected the reading decline to 62, from 64 the previous month.
The government said February existing home sales dropped to an annualized rate of 5.84 million, from 6.09 million a month earlier. The figure was slightly above the 5.80 million expected by economists.
Among companies, restaurant operator
said it will restate earnings for 2001 and the first three quarters of 2002. The company said in a release that the change is "not attributable to fraud or misconduct" but is due to impairment charges, asset sales and other items. AFC shares closed down 21% at $13.52.
Shares of credit-card company
lost 4% at $35.01 after analysts at Merrill Lynch said the company may be hurt by slow spending and travel amid war with Iraq. They lowered their profit estimates to $2.22, from $2.26 in 2003.
, the largest U.S. disability insurer, also is restating its results after talks with the
Securities and Exchange Commission
. The company changed the way it accounts for investment losses, resulting in a $29.1 million reduction in net profit from 2000 to 2002. Its shares ended 20% higher at $9.96 as investors breathed relief that the restatement wasn't larger.
, the largest U.S. rail freight carrier, cut its first-quarter earnings outlook from continuing operations to a range of 58 cents to 60 cents a share, below analysts' expectations of 69 cents a share, according to Thomson First Call. Its shares shed 2% to $55.72.
Standard & Poor's said it may raise its corporate credit rating on
( ABF) and its Airborne Express carrier. The ratings are currently one level above junk. Airborne's shares climbed 10% to $19.82.
, formerly known as Philip Morris, inched lower after Fitch and Moody's said they might downgrade the company's credit rating. The news follows a court decision in which the tobacco company was ordered to pay more than $10 billion in punitive and compensatory damages for misleading smokers with the term "light" cigarettes. Altria's shares fell 0.3% to $33.48.
Moody's Investors Service lowered
( SBC) long-term debt ratings due to concerns over sales and earnings declines at the second-largest U.S. local phone operator. Still, SBC shares gained 2% at $21.26.
, the world's largest antivirus software maker, rose 4% to $40.81 amid news that it will be added to the S&P 500 index.