Stocks rise due to bargain hunting, despite war fears

NEW YORK -- Investors put their fears about Iraq on hold Wednesday, bidding shares higher for a second straight day despite President Bush's warning that a war is more certain.

Lower prices following two weeks of heavy selling brought bargain hunters to Wall Street. But the market still had to fight hard for its gains -- trading was choppy in response to Bush's State of the Union address Tuesday night and bad earnings news from companies including Kraft Foods.

Analysts said the market got little, if any, help from a decision on interest rates by the Federal Reserve. As many analysts had predicted, the Fed left rates unchanged at 1.25 percent and said it was not inclined to lower rates further.

After dropping as much as 143.84 in early trading, the Dow Jones industrial average closed up 21.87, or 0.3 percent, at 8,110.71, according to preliminary calculations. The Dow built on the nearly 100 points gained Tuesday to score its first multiple-day advance in two weeks, or since the four-day winning period that ended Jan. 14.

The market's broader gauges also finished higher, having shaken off earlier losses. The Nasdaq composite index rose 15.93, or 1.2 percent, to 1,358.11. The Standard & Poor's 500 index advanced 5.83, or 0.7 percent, to 864.37.

Still, analysts say the market won't continue to move higher or be able to hold on to gains until it is clear what will happen in Iraq -- when and if there will be a war and how successful the United States is in it.

"It's more difficult for the average investor to concentrate on the fundamentals of buying stocks when war is looming," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif.

Investors are highly concerned that a war with Iraq will botch an already shaky economic recovery and have been selling stocks for two weeks based on that fear and on disappointing earnings results and forecasts. The economic repercussions of war could include higher oil prices and a drop in consumer spending.

"The situation in Iraq overshadows any news on the economy or corporate earnings. ... Until we see that we are having rather significant success there, there is going to be enough uncertainty that people aren't going to be able to step in and make commitments to stocks," said Brian Bush, director of equity research at Stephens Inc. "What we are hearing from investments managers ... is that they would almost rather see us take military action tomorrow, because until then, it is going to be difficult for the markets to do anything."

The market was hardly affected by the Fed announcement, which analysts said wasn't surprising because there have been 12 rate cuts since January 2001 and the economy remains sluggish.

Among Wednesday's gainers, Unocal rose 58 cents to $28.46 after the oil and gas company surpassed fourth-quarter earnings estimates by 3 cents a share.

And, biotech firm Biogen rose 45 cents to $37.20 and chip equipment maker Applied Materials advanced 36 cents to $13.60 after UBS Warburg upgraded each of the companies.

But some poor earnings cut into the market's advance. Kraft Foods plunged $4.91 to $31.20 after saying that its 2003 earnings will be hurt by higher pension and retiree medical costs.

Diebold tumbled $4.87 to $35.48 after reporting fourth-quarter profits that missed analysts' expectations by 3 cents a share.

Advancing issues outnumbered decliners nearly 4 to 3 on the New York Stock Exchange, where trading volume was rather light.

The Russell 2000 index, which tracks smaller company stocks, rose 1.67, or 0.5 percent, to 374.84.

Overseas, Japan's Nikkei stock average finished Wednesday down 2.3 percent. In Europe, France's CAC-40 rose 1.4 percent, Britain's FTSE 100 fell 0.2 percent and Germany's DAX index gained 1.3 percent.