War Woes Sink Stocks
Wall Street pulled back sharply Monday, sobered by the realization that war with Iraq may be more difficult than investors had hoped. The Dow gave back more than 300 points after its biggest weekly rise in two decades -- a gain last week of 662 points, or 8.4 percent.
The move down came on the heels of a sell-off overseas after an appearance by Saddam Hussein on Iraqi TV.
With allied forces encountering resistance from Iraqi troops over the weekend, many investors chose to cash in profits following a stunning eight-day rally by the Dow and Standard & Poor's 500 index.
The Dow Jones industrials closed down 307.29, or 3.6 percent, at 8,214.68. It had gained 8.4 percent last week, its best showing since October 1982, and had advanced in eight straight sessions, the longest streak since December 1998.
The broader market was also sharply lower Monday. The S&P 500 index dropped 31.56, or 3.5 percent, to 864.34, 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 close at 1,369.78, after having advanced 6.1 percent last week.
The markets are down "obviously reflecting the extreme disappointment that events in the war are just simply not going as well as expected," Hugh Johnson, chief investment officer of First Albany Corp, told CBS News Radio. "Most had expected...a very short war with an early end to hostilities. Given the events that have transpired over the weekend, it doesn't look that way."
"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 a such a huge run-up so you would expect you would get a retracement."
"We're seeing some profit-taking today," agreed Art Hogan, market strategist for Jefferies & Co. "We're seeing that the war will be a matter of weeks, not days."
On Monday, U.S.-led forces pushed toward Baghdad, meeting resistance from sandstorms and Saddam's troops.
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, four men and a woman.
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.
In sector action, nearly all sectors were in the red except for gold and silver shares.
All 30 stocks making up the Dow Jones industrials saw declines Monday, including Altria, 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.
Leisure stocks were hard-hit on a dim view from Starwood Hotels & Resorts, which withdrew its financial outlook for the first quarter and full year due to a "significant deterioration" in its business as a result of the drawn-out Iraq situation and related geopolitical conditions.
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.
Gainers, meanwhile, included defense companies on expectations of great demand for their products.