By Richard Bloom
The Globe And Mail
Saturday, March 22, 2003

With files from reporter Marian Stinson and Bloomberg

The devastating bomb attack on Baghdad sparked a massive buying spree in stock markets yesterday, capping the best week for U.S. blue chips since October, 1982.

The launch of the so-called "shock and awe" air raids on the Iraqi capital and throughout that country sent stock prices higher on both Bay and Wall Streets as investors speculated the war would be a short campaign.

"Investors want this thing to rally," said Adrian Mastracci, president of KCM Wealth Management Inc. in Vancouver. "We have a lot of people with quite a bit of money on the sidelines waiting to go. A lot of people are just itching to go, itching to put their money on it."

Ralph Acampora, director of technical analysis for Prudential Securities Inc. in New York, said: "Of course we are not cheering for war, but we are impressed with the news so far. The uncertainty that has surrounded us for months is now lessening."

Anti-aircraft fire lit up Baghdad skies, marking the third consecutive night of bombing.

Alongside those attacks, coalition ground forces consolidated significant advances in the country's south and west.

On that news, all of the major North American indexes finished the day well into positive territory.

In New York, the broad Standard & Poor's 500-stock index jumped 20.06 points or 2.28 per cent to 895.9. And the blue chips pushed the Dow Jones industrial average up a whopping 235.37 points to 8,521.97. The technology-rich Nasdaq Stock Market's composite index climbed 19.07 points or 1.35 per cent to 1,421.84.

In Toronto, the S&P/TSX composite index closed up 60.32 points or nearly 1 per cent to 6,535.9. The impressive gains pushed indexes past some closely watched milestones:

§ The Dow's winning streak is now at eight sessions, during which the blue-chip index has skyrocketed 997.56 points. For the week, the Dow gained 661.91 points or 8.42 per cent -- its strongest week since it jumped 8.72 per cent in October, 1982, and better than its post-Sept. 11 surge of 7.43 per cent.

§ The S&P 500 posted a 7.5-per-cent rise on the week, its best weekly performance since late September, 2001.

§ All three key U.S. indexes are now positive for 2003, but Canada's benchmark still has 78.6 points to go before it reaches its Dec. 31, 2002, close of 6,614.5.

The Canadian dollar got hit yesterday in the rush to buy U.S. assets. It fell below 67 cents (U.S.) for the first time in three weeks, closing at 66.92 cents.

The U.S. dollar climbed against a broad range of currencies, reaching ¥121.53 from ¥120.32 on Thursday. It closed at $1.0504 against the euro -- the strongest since Jan. 10.

"Logically, the faster [the war], the sooner we will see economic agents returning to a more normal day-to-day routine, and the sooner we will get the U.S. recovery back on track," Bank of Nova Scotia economist Andrew Pyle wrote in a commentary to clients.

"The question then is how short a conflict does this have to be? Of course, there is no answer to that since the perception and expectation of the likely duration of conflict varies from participant to participant; however, many believe that 'short' would be something less than a month," he said. If it does take less than a month, he added, it would be about 1½ months shorter than the first Persian Gulf war, used by analysts as a reference point.

Despite yesterday's impressive stock runup, Mr. Mastracci is advising his clients to sit tight.

"The [investment] game plan is not something you change daily . . . there's got to be a good reason to change the game plan. Just because we have a war really isn't a good reason to change the plan," he said, pointing to lacklustre fundamentals within the influential U.S. economy and continued sluggishness of profit growth by the world's largest corporations.

Ten-year U.S. Treasury notes suffered their biggest weekly hit since December, 2001. Investors shifting to riskier assets drove 10-year yields up 0.4 percentage points since Friday of last week.

"Yields could rise a little bit more," said Gary Pollack of Deutsche Bank AG's private banking unit said. "Given how well the war is going and how strongly the stock market has rebounded, the Treasury market is losing its flight-to-quality rally."

Prices of Canada's benchmark 10-year note also fell, as the yield rose about 0.3 percentage points.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.