Bargain hunters halt Wall Street sell-off

Bargain hunters took charge of Wall Street today, halting the market’s protracted sell-off and giving stocks their first respectable advance in more than two weeks.

The Dow Jones industrials climbed nearly 100 points.

Stocks rallied despite the fact that investors were waiting nervously for President George W. Bush’s State of the Union address, which was expected to deal with a possible war with Iraq and the sluggish economy.

The renewed buying, aided by better-than expected earnings, pushed the Dow back up above the 8,000 mark after the blue chip average fell below that milestone Monday for the first time in three months.

Analysts said the market was due for a rebound after having seen stocks fall for seven of the previous eight sessions.

But they also suspected the buying would be short-lived due to investors’ ongoing fears that a possible war with Iraq will undermine an already flagging economy.

The Dow closed up 99.49, or 1.3%, at 8,089.05, according to preliminary calculations. It was the Dow’s biggest advance in more than two weeks, or since January 9, when it rose 180.87.

In the previous eight sessions, the Dow dropped 853 points, more than wiping out all of its 2003 gains. On Monday, the Dow dropped 141.45 to close below the 8,000 level for the first time in three months, or since October 14, when it stood at 7,877.40.

The broader market also enjoyed a lift from bargain hunters. The Nasdaq composite index rose 17.04, or 1.3%, to 1,342.31. The Standard & Poor’s 500 index advanced 11.07, or 1.3%, to 858.55.

But the market’s gains failed to entirely wipe out Monday’s declines, much less those suffered in two weeks of selling, a sign that investors were cautious ahead of Bush’s address later tonight.

“It is pretty obvious that there is an interest to see what the president is going to say tonight. So, as far as the fundamentals go, like earnings, they are going to take a backseat as the Iraq issue plays itself out,” said Kevin Caron, market strategist at Ryan, Beck & Co.

Investors were also waiting to see what action the Federal Reserve Open Market Committee might take at its two-day meeting that began Tuesday. Analysts expected the Fed to leave interest rates unchanged but to move its bias back to one of easing rates in the future.

The market managed to rally despite a lacklustre report on consumers and discouraging news about durable goods orders.

But there was some positive economic news. The Commerce Department also reported new home sales hit a record in December, rising to a seasonally adjusted annual rate of 1.08 million last month, marking a 3.5% jump from November’s level.

Better-than-expected earnings reports, absent during Monday’s sell-off, contributed to the market’s gains today. Procter & Gamble rose 1.95 dollars to 85 dollars on fourth-quarter profits that were a penny a share higher than Wall Street’s estimate.

Xerox climbed 1.40 dollars to 9.45 dollars after posting a fourth-quarter profit of a penny a share, much better than the 11-cent loss analysts were anticipating.

Advancing issues outnumbered decliners slightly more than 9 to 5 on the New York Stock Exchange, where trading volume was light.

The Russell 2000 index, which tracks smaller company stocks, rose 4.59, or 1.3%, to 373.17.