Stocks Gets Help From West Coast Ports Developments

October 8, 2002

NEW YORK — Stocks rose in volatile trading Tuesday, snapping a four-session losing streak, as hopes the West Coast port labor dispute will soon end and upbeat earnings from PepsiCo. drew bargain-hunters back to the market.  

Indexes finished up but well off session highs. The Dow Jones industrial average rose 78.65 points, or 1.06 percent, to 7,501.49, while the technology-laced Nasdaq Composite Index , which closed on Monday at levels last seen in August 1996, added 9.82 points, or 0.88 percent, at 1,129.22.

The broader Standard & Poor's 500 Index climbed 13.27 points, or 1.69 percent, at 798.55 after closing at its lowest point since the spring of 1997 on Monday. Monday's selloff yanked the S&P 500 down 48.59 percent from its record closing high in March 2000, making this the deepest bear market since 1937-1938, according to data from Banc One Investments Advisors.

President Bush said he will ask a court to force the reopening of West Coast ports after a 10-day-old lockout that has cost billions of dollars and stunted international trade.

"Any progress that they can make to solve the strike (lockout) will be very positive for the marketplace," said Bob Basel, a senior trader at Salomon Smith Barney.

Major stock gauges have tumbled to multiyear lows in recent days on fears of a possible war with Iraq and concerns about the economy and corporate profits. These worries linger, but traders said some unexpectedly positive earnings forecasts and the prospect of a quick resolution to the shipping impasse drove the day's gains.

Investors took heart after Bush said he will seek a court order to suspend a management lockout of workers at 29 U.S. West Coast ports. Citing a need to protect the U.S. economy and jobs, Bush is invoking the 1947 Taft-Hartley labor act for the first time since 1978 despite administration fears of an organized labor backlash.

Leading clothing retailers, considered to be among the most vulnerable to the shipping dispute, rallied, some rising as much as 9 percent. Gap Inc. added 75 cents to $9.59, Limited Brands Inc. jumped $1.01 to $13.91 and Abercrombie & Fitch Co. climbed $1.48 to $17.40.

PepsiCo jumped $5.32, or 15 percent, to $41.10 after the company said its third-quarter profit rose as most of the food and soft drink company's units posted gains in sales and profits. Rival Coca-Cola Co., the world's No. 1 soft drink company, rose $1.99, or almost 4 percent, to $52.12.

Gold stocks lost ground as major market indexes climbed and investors yanked cash out of so-called safe havens. The American Stock Exchange's gold bugs index tumbled 4 percent.

Utility stocks fell after Allegheny Energy Inc. said it defaulted on some of its key credit agreements, becoming the latest victim of a slump in power trading that followed the collapse of Enron Corp. Allegheny also warned that earnings this year and next will be weaker than expected because of a slowdown in wholesale trading.

Allegheny shares plunged $3.72, or almost 50 percent, to $3.80. The S&P utilities index tumbled more than 4.3 percent.

Carmakers slumped after Credit Suisse First Boston cut its investment rating on the auto sector to "market weight" from "overweight."

Ford Motor Co. shares fell 75 cents, or 8.8 percent, to $7.75 after CSFB downgraded the automaker to "neutral" from "outperform" and halved its price target, citing concerns about the ability of the world's No. 2 automaker to maintain its investment grade credit rating.

General Motors Corp fell $2.28, or 6.4 percent, to $33.60 and ranked as one of the biggest percentage losers on the Dow.

Investors are still on edge as third-quarter earnings trickle in this week, heightening tensions in a market troubled by the slow pace of corporate profit growth.

"We joke here on the desk that it's safe to buy stocks for 10 minutes. Then it's going to sink back to the fact we could be going to war, the strike is still on, the economic numbers are still bad," said Andrew Baker, a senior Nasdaq trader for Wedbush Morgan. "No one has any conviction in these rallies."

Losers beat out winners by a ratio of 17 to 15 on the New York Stock Exchange and a ratio of 17 to 16 on Nasdaq. Trading was moderate, with more than 1.93 billion shares changing hands on the Big Board and more than 1.83 billion traded on Nasdaq.

The Russell 2000 index, which tracks smaller company stocks, rose 0.48, or 0.1 percent, to 338.77. 

Overseas, Japan's Nikkei stock average finished Tuesday up 0.2 percent. In Europe, France's CAC-40 lost 1.4 percent, Britain's FTSE 100 fell 1.3 percent, and Germany's DAX index declined 1.7 percent.

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