Originally created 12/15/03

Saddam's capture expected to give stock market, dollar a short-term boost



NEW YORK -- The capture of Saddam Hussein will give a temporary boost to a Wall Street already bullish after the Dow Jones industrials recently pushed through the 10,000 barrier, analysts said Sunday.

The news is likely to push the dollar higher and could send crude oil prices lower when trading resumes Monday.

"Psychologically, the news is nothing but good. There's no doubt the world market will rally off that," said Gary Kaltbaum, president of Kaltbaum & Associates, a money management firm in Orlando, Fla.

Many believe Saddam's capture might help stabilize the country and boost oil production, which has been curtailed by widespread infrastructure problems. But analysts said the news probably will have no lasting effect on financial markets.

"I don't think anybody will believe that because we've captured Saddam, the war in Iraq or the war on terrorism is over," said Hugh Johnson, chief investment officer at First Albany Corp. "The market response I think will be positive, but in my judgment somewhat subdued."

In Asian trading Monday, the dollar was strong against major currencies. The euro was trading at $1.2143 compared with Friday's New York close at 1.2275, while the dollar was worth 108.33 yen against its New York close at 107.86 yen.

Kaltbaum agreed that Saddam's capture isn't likely to affect stocks for long.

"We'll have a strong open Monday, but I don't know if it will last," Kaltbaum said, adding that he believes valuations already are a bit high. "This is something out of the ordinary. ... But in the real scheme of things, will it affect the earnings and economy? Absolutely not."

Last week, the Dow closed above 10,000 for the first time since May 2002 on a batch of strong economic data and Federal Reserve minutes suggesting higher interest rates weren't coming any time soon. Earlier this month, the Nasdaq composite index crossed the 2,000 milestone, although it has since retreated.

Incorrect rumors about Saddam's capture on March 21 prompted a 235-point surge in the Dow, but that occurred during the height of the war and investors are now more focused on economic news.

Analysts said the market is poised to move moderately higher, but perhaps more because stocks tend to be strong in late December and early January as investors put year-end bonuses and dividends to work.

"We'll have a feel-good rally," Johnson said. "But the big question on investors' minds is how well the economy and earnings will do in 2004? ... Ultimately I think the market will move a step forward and half a step back. Progress will be slow."