Powell speech bolsters market
Traders bet that the strength of Powell's speech will help draw international backing.
February 5, 2003: 1:13 PM EST
By Justin Lahart, CNN/Money Staff Writer
NEW YORK (CNN/Money) - No, Secretary of State Colin Powell did not offer up a smoking gun. But the evidence he presented against Iraq Wednesday was more convincing than what Wall Street expected.
Stocks rose as Powell made his speech before the U.N. Security Council as traders bet that the chances of broad-based international action against Iraq have been raised.
When Powell finished speaking, the Dow Jones industrial average was 60 points higher than where it had been when he started. The yield on the benchmarket 10-year Treasury had been pushed from 3.94 to 3.98 percent.
Following the speech, the market went higher still.
"I thought it was extremely compelling," said Prudential Securities political analyst Chuck Gabriel. "You couldn't have scripted it better -- reluctant general making the case for war."
Building the case
In his presentation, Powell played tapes of what he said were Iraqi military officers discussing eluding surveillance and U.N. weapons inspectors, showed satellite images of suspected Iraqi chemical weapons sites and detailed links between the Iraqi government and al Quaeda.
It is unclear how other nations will react to Powell's speech, but investors hope that its strength will mean that more nations will fall in line with the U.S., or at least not oppose it outright.
"The presumption," said Credit Suisse First Boston bond market strategist Mike Cloherty, "is that if you get a more unified opposition to Iraq, you reduce some of the uncertainties."
In fact, speculation has risen that, despite their bluster, other countries are moving to act with the U.S. In France, for instance, the aircraft carrier Charles de Gaul departed unexpectedly for three weeks of maneuvers, including joint exercises with the USS Harry Truman.
On Wednesday, the International Herald Tribune reported that according to a normally well-sourced French newsletter, Paris officials are quietly preparing for war.
In some respects, what countries like France do or do not do, has become a sideshow. Barring Saddam's exile or ouster, the course set by Powell Wednesday seems clear.
"I think there's a one word summary out of this thing: War," said Trilogy Advisors chief investment strategist Bill Sterling.
Markets hate uncertainty, the saying goes, but the certainty of war gives rise to other uncertainties. Winston Churchill was not one to back down from a fight, but gave a warning that applies, in the current period, to statesmen and investors alike:
"Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events."
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