By Denise Duclaux
NEW YORK, March 18 (Reuters) - Wall Street geared up for a surge at Tuesday's opening bell, extending a powerful rally from a day earlier, as investors pile into stocks on growing expectations for a swift and decisive U.S. victory over Iraq.
"The rally is predicated on the fact that we seem to have clarity on one of the largest things overhanging the market -- the Iraqi situation," said Arthur Hogan, chief market analyst at Jefferies & Co. "We are betting on some relatively swift success. It's going to be hard for anyone to step out and stop that momentum."
U.N. weapons inspectors pulled out of Iraq on Tuesday and U.S. forces prepared to invade after President George W. Bush gave Saddam Hussein and his sons 48 hours to flee the country.
His ultimatum helped dispel the uncertainty plaguing Wall Street for months now and fueled hopes the market would repeat the stellar performance it gave after the first Gulf war.
The Wilshire 5000 , the broadest measure of U.S. stock market performance, surged 37 percent from the launch of the air campaign during the first Gulf war on Jan. 16, 1991, through the end of that year,
Equity futures, which had slipped into negative ground minutes after Bush's speech, improved overnight and signaled a strong start on Wall Street. The June S&P 500 futures charged up 11.50 points to 872.30, the June Nasdaq futures jumped 14 points at 1,088, and the June Dow futures scrambled up 108 points at 8,210.
World oil prices fell by 10 percent on Tuesday and global markets trekked higher. The FTSE Eurotop 300 index of pan-European blue chips climbed 2.33 percent as the narrower DJ Euro Stoxx 50 index rose 2.45 percent.
All major Asian-Pacific stock markets rose following Bush's televised speech. Tokyo's Nikkei average ended 1.05 percent higher at 7,954.46, as profit-taking trimmed earlier gains. The broader TOPIX index was up 0.82 percent at 783.56.
FED TAKES BACKSEAT, SOME QUESTION RALLY
The meeting of Federal Reserve policy-makers on Tuesday is expected to take a back seat as the threat of war consumes Wall Street. With interest rates at historic lows and the Fed running out of monetary ammunition, most dealers expect the central bank to hold rates steady, but to adjust its balance of risk assessments toward economic weakness. The Fed is expected to announce its decision at about 2:15 p.m. (1915 GMT).
The Commerce Department's report on U.S. housing starts, scheduled for release at 8:30 a.m. (1330 GMT), could also fade into the background. The report is expected to show housing starts totaled 1.723 million in February at a seasonally adjusted, annualized rate, down from 1.85 million in January.
Some market watchers warn the market's upturn, which has pushed the Dow up 8 percent since Wednesday's close when the blue-chip gauge neared multiyear lows, may be fleeting. They caution the nation's economic recovery is lackluster even without the threat of war and a conflict in the Middle East could also open a Pandora's box of problems.
Indeed, the U.S. government put the country on the second-highest level of alert on Monday and spelled out tough new security measures, including temporary detention of some asylum seekers, as it warned of possible attacks if America takes military action against Iraq.
P&G NABS WELLA
Consumer products maker Procter & Gamble Co. is likely to grab some attention during the session.
The Dow component on Monday after the close raised its quarterly profit outlook. The company also said it would take control of German hair care firm Wella in a $7.02 billion deal. P&G closed at $85.50.
Applied Materials Inc. , responding to the severe slump in demand for microchip-making equipment, will cut 2,000 jobs, or 14 percent of its staff, in its second major round of layoffs in five months, the company said. Applied Materials, the world's dominant maker of computer-chip production tools, ended at $13.129.
Gateway Inc. , the No. 3 U.S. personal computer maker, warned on Monday after the close that its first-quarter results would fall far below analysts' forecasts and said it would slash its work force by 17 percent in a bid to cut annual costs by over $400 million. Shares closed at $2.40.
In Monday's regular session, the blue-chip Dow Jones industrial average jumped 282.21 points or 3.59 percent to 8,141.92 and the broad Standard and Poor's 500 climbed 29.52 points, or 3.54 percent, to 862.79 -- both logging their fourth up days in a row. The tech-laced Nasdaq Composite Index rallied 51.94 points, or 3.88 percent, to 1,392.27.