War Worries Spook Stocks

Stocks tumbled Monday, pulling the Dow Jones industrials down more than 170 points, after France said it was prepared to vote against the U.N. resolution on Iraq.

For investors, the French announcement raised the prospect of the United States going to war with Iraq without support from its allies.

"It is just a very gloomy picture," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. "Certainly the attitude, the psychology, the mood on Wall Street is one of gloom and doom, and that is continuing."

The declines were in keeping with the steep selloffs the market has suffered all year due to uncertainty about war and the impact it would have on the already shaky economy. Trading volume was very light, another sign that investors were refusing to make major commitments.

"The irrational despair seems to imply that there is no floor to stock prices. The public without question has retreated psychologically and monetarily. ... The risk aversion is quite dominate," said Ned Riley, chief investment strategist at State Street Global Advisors.

With all 30 of its stocks falling, the Dow closed down 171.85, or 2.2 percent, at 7,568.18, according to preliminary calculations. The losses added to last week's decline of 1.9 percent, although the Dow finished higher on Friday.

The broader market also pulled back. The Standard & Poor's 500 index dropped 21.41, or 2.6 percent, to 807.48.

The Nasdaq composite index fell 26.92, or 2.1 percent, to 1,278.37, following last week's decline of 2.4 percent. Monday marked the three-year anniversary of the Nasdaq's all time closing high of 5,048.62. Since then, the Nasdaq, down 74.7 percent from that peak, and the rest of the market have suffered brutal declines.

"Usually when you get to these depths of pessimism something happens a catalyst comes along and reverses market psychology. But what that catalyst may be is anyone's guess, still part of the guessing game," Cardillo said.

Investors remained anxious about a war with Iraq, having heard Secretary of State Colin Powell say over the weekend a conflict is drawing nearer. On Monday, Iraq urged the U.N. Security Council to stand up to what it deemed Washington's "blood thirsty whims" and reject a March 17 deadline for disarmament, while a top U.N. nuclear chief said he was offering suggestions to Saddam Hussein on how to avert a war.

Also on Monday, France said it will vote against the U.S.-backed March 17 deadline, heightening investors' concerns that the United States will enter a war without sufficient support.

"There is just a higher level of anxiety (on Wall Street), if you can believe it, than there was before. ... As we get closer to the (March 17) date, people are going to get more nervous about domestic terrorism activity," Riley said.

The market was disappointed to hear an elite group of economists cut growth estimates. Respondents to the Blue Chip Economic Indicators' March poll cut their forecast for first quarter gross domestic product growth to an annualized rate of 2.2 percent from an earlier prediction of 2.6 percent, according to Dow Jones Newswires. The group cut its 2003 growth outlook to 2.6 percent from an earlier forecast calling for 2.7 percent.

Blue chip losses were subsequently widespread.

IBM fell $2.20 to $75.70, Caterpillar declined $1.01 to $44.79 and Wal-Mart stumbled 99 cents to $47.13.

Among other losers, drug maker Bristol-Myers Squibb declined 29 cents to $22.51 after restating earnings for 1999-2001, revising profits down by $900 million because of accounting practices under investigation by prosecutors and regulators.

Nextel Communications fell 90 cents to $11.26 after RBC Capital Markets downgraded it to "sector perform" from "outperform."

Host Marriott declined 28 cents to $6.41 after Morgan Stanley cut its rating to "underweight" from "equal-weight."

Declining issues outnumbered advancers nearly 4 to 1 on the New York Stock Exchange. Volume was extremely light.

The Russell 2000 index, which tracks smaller company stocks, fell 6.17, or 1.7 percent, to 348.01.

Overseas, Japan's Nikkei stock average finished Monday down 1.3 percent. In Europe, France's CAC-40 slid 2.4 percent, Britain's FTSE 100 lost 1.6 percent and Germany's DAX index dropped 4.2 percent.