Upbeat economic data remain elusive, but Saddam Hussein was a "no-show" Tuesday and stocks rallied modestly in reaction.
Shares actually rose briefly following a weaker-than-expected report on manufacturing at 10 a.m. EST, indicating an enduring undercurrent of bullishness among market participants. Such sentiments surfaced more dramatically after Iraqi television broadcast an official reading a statement attributed to Hussein, rather than read by the dictator directly.
In an otherwise relatively light day of war-created news, the other major development was Defense Secretary Donald Rumsfeld's declaration: "There will be no outcome to this war that leaves Saddam Hussein and his regime in power. Let there be no doubt, his time will end, and soon. The only thing that the coalition will discuss with this regime is their unconditional surrender."
With uncharacteristic understatement, Rumsfeld also said Hussein's failure to appear on Iraqi television was an "interesting development."
Hopes Hussein is either dead or incapacitated helped the
Dow Jones Industrial Average
trade as high as 8100.53 at about 2 p.m. EST before closing up 1% to 8069.96. The
gained 1.2% to 858.47 and the
rose 0.5% to 1348.29.
As has been the case of late, the dollar rose in concert with shares, while Treasuries, gold and oil continued to run counter to stocks and the greenback.
The price of the benchmark 10-year Treasury fell 6/32 to 100 14/32, its yield rising to 3.82%. In commodity trading, crude futures fell 4% to $29.78 after Nigeria's largest oil workers' union called off a strike, while gold slid 0.5% to $335.20.
Technical factors potentially contributed to the stock market's gains, including the Dow's 50% retracement of its mid-March rally and support for the S&P in the 835 to 850 area, as discussed
The gains were relatively modest but, notably, trading volume was higher vs. Monday's setback, continuing a recent trend. In
trading, nearly 1.5 billion shares were exchanged (vs. just under 1.4 billion Monday) while advancing stocks led decliners 11 to 5. Gainers led 3 to 2 in over-the-counter trading, where 1.1 billion shares changed hands.
"I think a lot of the institutional sellers are done with what they had to do," said Bob Basel, director of listed trading at Salomon Smith Barney, explaining the recent trend of higher volume on up days and lower volume on down days. "Buyers are just waiting to step in and cover shorts or load 'em back up on any positive war news."
In that category, Hussein's failure to appear on Iraqi television qualified, Basel said. "To a certain extent, everyone is curious why he wasn't on TV."
Another trader, and longtime reader, also attributed the "little run" at the day's end to "shorts not wanting to get caught by more 'Saddam is dead' rumors or, let's hope, reality," of his (timely) demise.
Stock proxies were fading in the final hour before rallying into the close as speculation about Saddam "was enough to keep the shorts from piling on even in the face of weakness toward the end of the day," he explained.
Despite Rally, Data Support Skepticism
On the economic front, the big news of the day was the Institute for Supply Management's national manufacturing index, which fell to 46.2 in March, its lowest level since November 2001 and vs. expectations for a tamer drop to 49 from 50.5 in February.
Because of Monday's weaker-than-expected Chicago PMI report, Basel suggested a weak ISM survey was already "factored in" to shares, perhaps during Monday's final-hour swoon.
As with the Chicago report, the ISM index suggested contraction in the national manufacturing sector concurrent with rising costs. The prices paid index of the ISM survey rose to 70 from 65.5 in February.
The ISM number "threw a splash of cold water on the view that the late-2002 spurt in the manufacturing sector was anything more than a brief, auto-related inventory buildup," commented David Rosenberg, chief U.S. economist at Merrill Lynch. "The risks of a double-dip recession continue to climb."
Technically, an economic contraction preceded by five-consecutive quarters of growth would be a
recession rather than a "double-dip." Regardless, Rosenberg's point is the vast majority of recent releases (80% by his estimation) have been "worse than expected" and that "revisions of prior released data have also been generally down."
Elsewhere on the economic front Tuesday, the government reported construction spending fell 0.2% in February, the first monthly decline since August but better than forecasts for a 0.8% drop. Separately, and more positively, Challenger Gray & Christmas reported layoffs fell 38% in March and to the lowest level since September.
In addition to the mostly negative economic news, stocks overcame more reports of SARS cases, including the temporary quarantine of an American Airlines flight from Tokyo after four passengers exhibited
SARS-like virus symptoms upon its arrival in San Jose, Calif.
Traders said the market is likely to continue trading mainly on war-related news until later in the week -- perhaps Thursday afternoon -- when the focus turns to Friday's employment report.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.