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Stocks Rise on News of Success in Kabul


NEW YORK — The stock market rallied broadly Tuesday, as investors focused on the success of U.S.-backed forces in Afghanistan and on continued hopes for a corporate profit rebound next year.

The Dow Jones industrial average rose 196.58 points, or 2.1%, to 9,750.95, paced by big gains in shares of Home Depot, Microsoft and General Motors, among others. Only two of the Dow 30 lost ground.

The Nasdaq composite index gained 51.98 points, or 2.8%, to 1,892.11. The broader Standard & Poor's 500-stock index climbed 20.76 points, or 1.9%, to 1,139.09.

It was the highest close for Nasdaq and the S&P since late August and the highest for the Dow since Sept. 6. Winners out-gained losers by 2 to 1 on Nasdaq and by 22 to 9 on the New York Stock Exchange. Trading was brisk.

Earlier, stocks rallied strongly across Europe, also on word that U.S.-supported Northern Alliance troops in Afghanistan had driven forces of the ruling Taliban from the capital of Kabul.

France's CAC 40 index climbed 4.3%, Germany's DAX index rose 2.6%, and Britain's FTSE-100 index was up 2.5%.

"Investors are certainly acting like [the war] is not going to be a protracted drag on economic activity," said Charlie Crane, a strategist at Victory SBSF Capital Management. "It allows investors to focus on what positives may unfold as a result of monetary and fiscal stimuli that have been applied with a very heavy hand over the last several months."

The dollar jumped to a three-month high of 87.92 cents against the euro and rose to 121.55 Japanese yen. The yield on the benchmark 10-year U.S. Treasury note climbed 0.07 percentage point to 4.38%, reflecting a relaxation in terrorism fears and a shift by investors to stocks from bonds.

Airline and hotel stocks rebounded somewhat from steep losses following Monday's crash of an American Airlines jet in New York, which killed more than 260 people.

AMR, parent of American Airlines, gained 52 cents to $17.01, and Delta Air Lines rose $1.41, or 6%, to $24.68. General Electric, manufacturer of the engines on the A300 Airbus that crashed, bounced back from a 98-cent loss on Monday, gaining $1.13 to $40.56.

The S&P hotel index jumped 5.2%, with Marriott International up $2 to $34.50 and Starwood Hotels and Resorts Worldwide up $1.50 to $25.44.

Analysts said that because preliminary findings pointed to mechanical failure rather than sabotage as the likely cause of the crash, the effect on Tuesday's trading was positive.

"There was maybe relief that every time something happens, it doesn't have to be terrorism," said Stuart T. Freeman, chief equity strategist for A.G. Edwards in St. Louis.

Retail stocks generally moved higher on news that companies are seeing results from their cost-cutting efforts. Wal-Mart Stores was an exception, falling 58 cents to $55, despite reporting an 8% profit gain in its fiscal third quarter.

Home Depot jumped $2.88 to $44 after the company said it had managed a 20% gain in quarterly profit despite flat sales. Home Depot credited its ability to squeeze suppliers for lower prices.

J.C. Penney gained $1.50 to $25.25 after announcing that it had logged a $31-million profit in the quarter just ended, reversing a similar-size loss a year ago.

The retailers' reports were among a few "little kernels of optimism" that have been helping to energize investors in recent days, said Hugh A. Johnson Jr., chief strategist at First Albany Corp.

Other signs include a slight uptick in consumer sentiment as measured by last week's University of Michigan survey, Johnson said.

Broadly speaking, "investors are buying the consensus forecast among economists that the economy and earnings are going to turn the corner in the first and second quarter of 2002," Johnson said.

Also fueling the optimism about the economy is the intensive credit-easing campaign of the Federal Reserve Board, which has delivered 10 straight reductions in short-term interest rates since Jan. 3 and is expected to cut again in December and perhaps in January.

Semiconductor makers such as Intel gained on hopes the computer-chip industry had scraped bottom. Texas Instruments Inc. rose $1.92 to $33.82 after saying the third quarter could mark a low point for semiconductor orders. Intel added $1.67 to $30.05.

Oracle Corp. declined 88 cents to $14.52 after the investment bank Credit Suisse First Boston reduced its rating on the maker of business software, citing weakening demand.


Reuters and Bloomberg News were used in compiling this report.


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