Stocks finished higher Monday after Baghdad said it would allow U.S. spy aircraft to fly unhindered over Iraq as a concession to preempt a war. But the uncertainties of the Iraq situation still weighed on market sentiment, notes S&P MarketScope.
The Dow Jones industrial average finished up 55.88 points, or 0.71%, to 7,920.11, while the broader Standard & Poor's 500-stock index gained 6.19 points, or 0.75%, to 835.88. The tech-laden Nasdaq composite index added 13.65 points, or 1.06%, to 1,296.12. Trading volume was relatively light as Wall Street sought to regain some of the lost ground after a recent selloff that has pushed the major stock indexes down about 5% year-to-date.
The major indexes moved higher after news reports indicated that Iraq had unconditionally agreed to allow U2 spy planes to assist U.N. weapons inspectors. On Sunday, Secretary of State Colin L. Powell warned that if Saddam Hussein was still not fully cooperating with U.N. inspectors at the end of this week, President Bush would press immediately for consideration of a Security Council resolution authorizing possible use of force against Iraq -- even as France, Germany and other members of the Security Council continued to call for more time before considering the use of force.
This week, investors will have more key economic data to sift through. On Thursday: January retail sales data, import and export prices, and initial jobless claims for the previous week. On Friday: December business inventories, industrial production for January and the University of Michigan consumer sentiment gauge.
On Monday, investors digested a dour outlook on economic growth from the Blue Chip Economic Indicators, a closely watched newsletter that released its latest issue Monday. Analysts projected the U.S. economy would expand 2.7% this year, a scaled-down forecast from the January prediction of 2.8% growth.
The Bank Credit Analyst said Monday that investors are ignoring the steadily improving trend in U.S. corporate profits since late 2001. "A rising percentage of S&P groups are reporting higher earnings (which tends to lead overall forward earnings expectations). However, corporate guidance has not turned more upbeat, leaving investors to fret about the worsening geopolitical backdrop and soaring energy prices," BCA said in a report to clients Monday.
Though first-quarter earnings season is winding down, many companies are releasing reports this week. Marriott International Inc., the largest U.S. hotel company, said before the market opened Monday that its fourth-quarter loss narrowed from a year earlier, when the terrorist attacks depressed travel. Marriott cut its 2003 outlook as a slow economy forces companies to cut travel budgets. Marriott's net loss was $37 million, or 15 cents a share, compared with a loss of $116 million, or 48 cents, for the same period of 2001. Revenue rose 25% to $2.67 billion for the quarter ended Jan. 3.
After Monday's market close, Yum! Brands (YUM), the owner of Pizza Hut and Taco Bell, and the insurance company MetLife (MET) reported year-end results. Yum reported fourth-quarter earnings of 56 cents a share, up from 54 cents a year ago, beating the Wall Street's consensus forecast of 55 cents, the average estimate of 13 analysts polled by Thomson First Call. MetLife's earnings release was delayed.
Other earnings highlights this week include Applied Materials (AMAT), Aetna (AET), and Clorox (CLX) on Tuesday and Coca-Cola (KO) and Medtronic (MDT) on Wednesday. Thursday brings releases from Nvidia (NVDA) and Calpine Corp. (CPN), while on Friday, Navistar International (NAV) is set to post results.
In company news Monday, Johnson & Johnson (JNJ) plans to acquire biotechnology company Scios. (SCIO) for about $2.7 billion in cash to fill J&J's scarce new drug pipeline.
And General Motors (GM) moved higher on reports that Hughes Electronics' (GMH) DirecTV satellite-television business may be acquired by the Baby Bell SBC Communications (SBC) for more than $10 billion. Hughes is a unit of General Motors.
A criminal investigation into possible securities violations at HealthSouth Corp. (HRC) could hamper the search for independent board members -- a step seen as vital to addressing shareholder concerns weighing on the health-care company's share price.
About 10 current or former employees who traded company stock last summer have been questioned by the Federal Bureau of Investigation, William Horton, HealthSouth's corporate counsel, confirmed Sunday. He declined to provide names, but said none are members of HealthSouth senior management.
Officers and directors of Gillette. (G), the world's largest razor maker, purchased about $2.42 million in stock after the company lost a quarter of its value amid concern about falling sales of Duracell batteries.
U.S. Treasuries finished lower in price Monday in choppy trading. In addition to geopolitical events, traders were anticipating the Treasury's auctions of $24 billion in five-year notes on Tuesday and $18 billion in 10-year notes on Wednesday. The safe-haven demand for Treasuries should make for decent auctions, notes MMS International.
European stocks finished generally lower. London's FTSE index was down 20.10 points to 3579.10, or a 0.56% drop, while Paris' CAC 40 index fell 24.40 points, or 0.87%, to 2772.26. In Frankfurt, the DAX index climbed 13.80 points, or 0.54% to 2,583.14, after a report that German industrial production in January posted its largest monthly drop in nearly four years -- the result of a slump in manufacturing and construction output.
In European company news, Roche Holding AG, the world's biggest medical-test maker, agreed to buy Disetronic Holding AG for $1.2 billion, gaining technology that may free diabetics from blood tests and shots, Bloomberg reported.
In Asia, stocks edged up. Japan's Nikkei 225 index gained 36.77 points, or 0.44%, to 8,484.93, while Hong Kong's benchmark Hang Seng gained 81.19 points, or 0.89%, to 9,232.14.