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Stocks surge on investor hopes

The Associated Press

NEW YORK — Wall Street shot higher as U.S.-led forces closed in Baghdad on Wednesday, boosting investor optimism that the 2-week-old war with Iraq might soon end. The Dow Jones industrials soared 215 points to their best performance in nearly two weeks.

Tech shares surged, led in part by a positive outlook from Biogen, while airline stocks gained on approval from House and Senate appropriations committees of about $3 billion in federal aid.

“The march to Baghdad is really driving the markets higher,” said Chris Wolfe, equity market strategist for J.P. Morgan Private Bank. “This (market) move emphasizes that we have a lot of cash on the sidelines ready to be put to work.”

“As we hear more rumors of Saddam being dead, that will come to permeate into investors’ thinking, bringing them closer to the thought that this is a war that is shorter in nature,” Wolfe added.

The Dow closed up 215.20, or 2.7 percent, at 8,285.06, having gained 77 points Tuesday to snap a four-day losing streak. It was the largest advance since March 21, when blue-chip stocks closed 235 points higher.

The broader market, meanwhile, posted their sharpest gains since March 17. The Nasdaq composite index climbed 48.42, or 3.6 percent, to 1,396.72. The Standard & Poor’s 500 index rose 22.42, or 2.6 percent, to 880.90.

On Wednesday, U.S. ground forces charged into the “Red Zone,” the Iraqi resistance surrounding Baghdad. A U.S. general said one of the key divisions defending the city of Kut had been destroyed.

That came after Iraqi satellite television broadcast statements attributed to Saddam. The leader did not appear in person, fueling speculation as to whether he might be wounded or dead, although state television later showed silent footage of Saddam meeting with Cabinet ministers.

U.S. troops also rescued Army Pfc. Jessica Lynch from Iraqi forces after she and her unit were ambushed March 23, helping to lift the spirits of investors concerned about allied casualties.

Stocks declined in recent days on investor worries that a prolonged war could threaten the nation’s fragile economic recovery. But analysts have said Wall Street could quickly see gains should there be any signs of an immediate resolution.

“We were already a little bit oversold,” said Todd Leone, trader at SG Cowen Securities. “Meanwhile, we were able to rescue the girl and people’s perception of what’s going on over there is much better, so investors are getting optimistic again.”

Wolfe agreed, saying the market’s recent declines represented a moderate pullback after the Dow notched a weekly gain of 8.4 percent two weeks ago, its best showing in two decades. He believes stocks should trade flat to higher in the coming days until the government’s employment report is released Friday.

“Our sense is that there really is little in the next few days that will really dismantle the strength of the move here,” Wolfe said. “The employment report will give us a clue as to how things are going.”

Investors, meanwhile, shrugged off a Commerce Department report Wednesday showing U.S. factory orders declining by 1.5 percent in February, the largest drop in five months. The reading came after orders went up 1.7 percent in January; it also was worse than analysts’ estimates.

Biogen climbed $3.70 to $33.99 after the biotech company raised its first-quarter earnings outlook, citing strong interest in its psoriasis drug. Other tech shares also gained, including Dow components Intel, which rose $1.10 to $17.52, and Microsoft, which increased $1.37 to $25.72.