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Stocks: There is hope after all

Wall Street shot higher Thursday, scoring its best day in five months on hopes that a U.S. war with Iraq would be short and successful. The Dow Jones industrials soared nearly 270 points while the Nasdaq composite index gained more than 60.

The Standard & Poor's 500 index had its the second-best day of 2003. The rally was an expected rebound after weeks of selling.

Optimism about the outcome of a military conflict allowed investors to shrug off a discouraging retail sales report. Trading volume was the most robust it has been this year.

"There is the expectation that Iraq will be resolved soon and the price of oil will come down and the outlook for the economy will improve and stock prices will rise. A lot of active investors are positioning themselves for that outcome. This (rally) reflects optimism that Iraq will be put behind us," said Hugh Johnson, chief investment officer for First Albany Corp.

Analysts said Wall Street was encouraged by a CNN report that said the Iraqi army was expected to surrender soon after the United States begins military action.

"The global consensus about the outcome of war with Iraq has become more positive, said Kevin Caron, market strategist at Ryan, Beck & Co., LLC. "The suspicion is that any engagement with Iraq may go better than expected."

The Dow closed up 269.68, or 3.6 percent, at 7,821.75, its biggest one-day win in five months, or since Oct. 15, when the blue chip average rose 378.28 to 8,255.68.

The broader market also spiked higher. The Nasdaq composite index rose 61.53, or 4.8 percent, to 1,340.77. It was also the Nasdaq's best one-day gain in five months, or since Oct. 15, when it gained 61.91 to close at 1,282.44.

The S&P 500 climbed 27.71, or 3.5 percent, to 831.90. The S&P's gain was its second-best of the year, behind the 29.21-point advance made Jan. 2.

"This is a statement about the war. The reason I say that is it is not just that the stock market is going up, it is that the traditional safe havens are not performing well. Treasuries are going down and gold is going down," Johnson said.

But analysts are still dubious of stocks' ability to sustain a true advance until there is more clarity about a war.

"It has enough juice in it today that the sellers have actually gone to the sidelines," said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis. But "if you are trying to figure out what the next chess move is, you can't."

Indeed, investors have a hard time trusting rallies, which they've seen fizzle out throughout the three-year bear market.

The session showed that investors haven't lost hope, and are anxious to see the market go higher. Volume, which has been sluggish throughout this year, surged as the advance gathered momentum.

And the market looked past a weaker-than-expected retail sales report for February. The Commerce Department reported sales last month fell by 1.6 percent, the worst showing in 15 months as war jitters and snowstorms kept shoppers away. Economists were expecting sales to fall by 0.5 percent.