US stocks buoyed on hopes of port peace

Hopes for an end to a US West Coast ports standoff pleased investors today, prompting them to buy stocks and give the market its first advance in five sessions.

Analysts said US investors were anxious for a reason to buy stocks after driving down prices for six weeks and the previous four sessions in particular.

But investors are also wary of committing to the market given uncertainty over earnings, the economy and the possibility of war with Iraq.

Investors’ wide-ranging emotions were evident in how stocks fluctuated throughout today’s session. The Dow Jones industrials rose as much as 199 in afternoon trading, having dropped as much as 91 earlier.

The Dow closed up 78.65, or 1.1%, at 7,501.49. It was the Dow’s first progress in five sessions, on the heels of a four-day loss of 515.95.

The market’s broader indicators were also higher after four straight days of selling. The Nasdaq composite index rose 9.72, or 0.9%, to 1,129.12, but was still trading at closing levels last seen in August and September 1996.

The Standard & Poor’s 500 index advanced 11.14, or 1.4%, to 796.42.

Analysts attributed the advance largely to optimism that the 10-day standoff between West Coast longshoremen and shippers would end.

Late this afternoon, the longshoremen’s union agreed to go back to work tomorrow under a 30-day contract extension. Also, President George Bush directed government lawyers to go to court to seek an injunction to end the labour dispute, which has cost the frail economy as much as 2 billion a day.

“Traders are responding positively to the fact that the West Coast port dispute, which has been costly, may in fact be near a resolution,” said Alan Ackerman, executive vice president of Fahnestock & Co.

Lower stock prices also contributed to the advance. All three indexes have suffered six weeks of declines on worries about Iraq and third-quarter earnings, which companies will be reporting over the next few weeks.

Amid a spate of profit warnings, analysts’ third-quarter growth estimates for companies have fallen to 5.45 from earlier forecasts of 16.6%, according to Thomson First Call.

“That is a much more significant downward revision than we usually see in a quarter,” said Ken Perkins, research analyst at Thomson First Call, adding that quarterly estimates are typically lowered by about 3%.

The market also was mindful today of developments dealing with Iraq. The House and Senate were debating resolutions to authorise Bush to declare war on Iraq and are expected to vote on Thursday.

Among today’s winners on Wall Street, PepsiCo soared 5.32, or nearly 15%, to 41.10 on third-quarter earnings that were a penny a share higher than analysts’ estimates and an upbeat outlook for yearly profits. The company said its annual income should be at the high end of expectations.

Sara Lee advanced 47 cents to 19.90 on an upgrade from Lehman Brothers. And, General Electric, which reports earnings results on Friday, rose 40 cents to 23.35.

But Ford fell 75 cents to 7.75 on a downgrade by Credit Suisse First Boston.

Despite the advance in the stock indexes, declining issues outnumbered advancers 15 to 13 on the New York Stock Exchange. Trading volume was moderate.

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