Stocks Sink 3 Percent on War Worries
By Denise Duclaux - Monday March 24, 3:30 PM EST

 NEW YORK (Reuters) - Stocks spiraled down more than 3 percent on Monday as grim television footage out of Iraq reminded investors the U.S.-led war to topple Saddam Hussein would not be easy and brought last week's rally to a halt.

"The market is pretty ugly," said Keith Keenan, vice president of institutional trading at brokerage Wall Street Access. "It's simply a giveback from the euphoria from the end of last week. The harsh military realities are starting to set in, and the market is discounting a longer military conflict."

Over the weekend, U.S.-led forces suffered their heaviest casualties so far, with stiff resistance from Iraqi soldiers as the push toward Baghdad continued. Iraqi footage of American prisoners of war gave pause to investors whose bets on a lightning-fast U.S. victory had driven the Dow industrials up a hefty 13 percent in an eight-day rally.

The Dow Jones industrial average (DJI) sank 282 points, or 3.31 percent, to 8,240. The broad Standard and Poor's 500 index (SPX) slid 29 points, or 3.24 percent, to 867. The tech-laced Nasdaq Composite Index (IXIC) tumbled 48 points, or 3.37 percent, to 1,374.

On Friday, the Dow jumped 2.84 percent, the S&P 500 leaped 2.29 percent and the Nasdaq climbed 1.31 percent. The Dow had its best week in more than 20 years as investors found hope for a swift end to the war in a firestorm of missiles and bombs raining on Baghdad.

Government bonds and gold prices climbed as investors dumped equities in favor of save-haven investments. World oil prices rebounded by almost $2 a barrel from four-month lows as investors' hopes for a quick end to the war were dashed.

AIRLINES LOSE ALTITUDE

Northwest Airlines Corp. (NWAC) fell $1 or 12 percent to $7.30. Northwest has said it was cutting 4,900 jobs -- about 11 percent of its work force -- and trimming its flight schedule by 12 percent because of lower travel demand due to the war in Iraq. Northwest's decision followed similar actions by other airlines.

The S&P Airlines index (GSPALI) lost 6.5 percent. Delta Air Lines (DAL) sank $1.76, or 15.6 percent, to $9.49. Southwest Airlines (LUV) dropped 83 cents, or 5.4 percent, to $14.45. AMR Corp. (AMR), parent of American Airlines, tumbled 38 cents, or almost 16 percent, to $2. UAL Corp. (UAL), owner of United Airlines, fell 4 cents, or 4.7 percent, to 81 cents. Continental Airlines (CAL) skidded $1.19, or 17.5 percent, to $5.63.

Wal-Mart Stores Inc. (WMT) tanked $1.91 or 3.5 percent to $52.76, pressuring the Dow. Wal-Mart said it still expects to meet its forecast for March sales at stores open at least a year, despite the "CNN effect" last week when potential shoppers were glued to televisions to watch coverage of the war with Iraq.

Dow stock Altria Group (MO) sank $1.39, or 3.9 percent, to $33.65. An Illinois judge's ruled that Altria unit Philip Morris USA was liable in deceiving smokers into thinking "light" cigarettes were safer than regular cigarettes and ordered the top U.S. tobacco company to pay $10.1 billion in damages.

The news dented other stocks in the sector, pushing the S&P Tobacco index <.GSPTOBA> down 3.9 percent. UST Inc. (UST) lost $1.05, or 3.6 percent, to $27.86, while RJR Tobacco Holdings (RJR) fell $1.68, or 4.6 percent, to $34.82.

El Paso Corp. (EP) gave up 34 cents, or 5.6 percent, to $5.79 in active trade on the New York Stock Exchange. El Paso said its expects to take a charge of $650 million in connection with its agreement to settle charges that it manipulated natural gas prices during California's energy crisis.

Standard & Poor's Ratings Services said the outlook remains "negative" for the natural gas pipeline operator, which has about $18 billion of on-balance sheet debt.

Symantec Corp. (SYMC) lost $3.42 or 8 percent to $39.15. U.S. Bancorp Piper Jaffray cut its rating for the computer security and services provider to "underperform" from "market perform" because of slower-than-expected sales.