Dow closes down 307 on fears of long war

NEW YORK -- War euphoria wore off on Wall Street Monday as investors realized that Operation Iraqi Freedom might not be so quick after all. The Dow Jones industrials gave back more than 300 points after its best week in two decades.\nWith 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.\n"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."\n"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."\nThe 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.\nMonday'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.\nThe 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.\nThe 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.\nOn Monday, 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.\nSaddam, 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.\nStocks 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.\n"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"