8-day rally ends as war doubts return
By Hope Yen
NEW YORK War euphoria wore off on Wall Street yesterday as investors realized that Operation Iraqi Freedom might not be so quick after all. The Dow Jones industrials gave back more than 300 points, following its best week in two decades with its worst day of the year.
"Going into the weekend, investors had this anticipation that there was a good chance that Saddam (Hussein) was killed and war might be ended," said Doug Sandler, chief equity strategist at Wachovia Securities. "The reality was that war is never clear and it's always worse than people expect.
"It's also just as much natural profit-taking," he added. "We had such a huge run-up so you would expect you would get a (retraction)."
The Dow closed down 307.29, or 3.6 percent, at 8,214.68, having gained 8.4 percent last week, its best showing since October 1982. The blue chips advanced in the previous eight sessions, their longest streak since December 1998.
Yesterday's decline was the biggest for the Dow since Sept. 3, when the blue chips closed 355 points lower. It erased nearly one-third of the Dow's 997-point gain from the previous eight sessions.
The broader market also finished sharply lower yesterday. The S&P 500 index dropped 31.56, or 3.5 percent, to 864.23, after a weekly gain of 7.5 percent. The index also has posted eight straight days of gains, its best performance since June 1997.
The Nasdaq composite index lost 52.06, or 3.7 percent, to 1,369.78, having advanced 6.1 percent last week. It rose in six of the previous eight sessions.
Yesterday, U.S.-led forces pushed toward Baghdad, meeting resistance from sandstorms and Saddam's troops. Iraq claimed to have shot down two U.S. helicopters and taken two pilots prisoner, a day after more than 20 Americans were killed or captured.
Saddam, meanwhile, sought to rally his people with a televised speech that proclaimed "victory will be ours soon." Over the weekend, Iraqi television showed five captured U.S. soldiers.
Stocks surged in the past two weeks on growing investor confidence in a brief and victorious war, but analysts have said that would quickly change should the conflict become prolonged. They also say trading will likely be choppy as investors focus on the latest war developments.
"This is going to be a very hard market in the coming days," said Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston. "Anything that indicates this war is going to drag on is going to pressure the market."
All 30 stocks making up the Dow Jones industrials saw declines yesterday, including Altria, which fell $1.45 to $33.59. That came after an Illinois judge ordered Altria's Philip Morris unit to pay $10.1 billion for misleading smokers into believing its light cigarettes are less harmful than regular labels. Philip Morris said it would appeal the decision.
Airline stocks also took a hit on concerns that a prolonged war would dampen travel. AMR, parent of American Airlines, fell 30 cents to $2.08, while Continental dropped $1.17 to $5.65, and Delta lost $1.73 to $9.52.
Walgreen fell $1.32 to $30.50 after the drugstore chain reported quarterly earnings that met analysts' expectations, but sales that came in below estimates.
Symantec dropped $3.47 to $39.09. The network security software company will replace Household International in the S&P 500 Index after the close of trading Friday.
Gainers, meanwhile, included defense companies on expectations of greater demand for their products. Lockheed Martin rose $1 to $46.41, while Northrop Grumman climbed $2.08 to $84.43.
Declining issues outnumbered advancers more than 4 to 1 on the New York Stock Exchange. Consolidated volume was light at 1.61 billion shares, compared with 2.28 billion traded Friday.
The Russell 2000 index, which tracks smaller company stocks, fell 8.98, or 2.4 percent, to 367.25.
Overseas, Japan's Nikkei stock average finished 2.9 percent higher yesterday. In Europe, France's CAC-40 tumbled 5.7 percent, Britain's FTSE 100 lost 3.1 percent and Germany's DAX index slid 6.1 percent.