NEW YORK -- Wall Street sank lower Monday as disappointing sales at Wal-Mart Stores, Inc. chilled the retailing sector and eroded early gains following the weekend capture of fallen Iraqi leader Saddam Hussein.
Stocks traded briskly around the globe on news that Saddam was in custody, but the rally was short-lived on Wall Street. The major indexes shot up initially, but steadily retreated as investors refocused on the domestic picture. While the arrest was important news for U.S. forces in Iraq, analysts were not surprised by its limited effect on the markets.
"This is a geopolitical event that gave us a nice, short-term blip, but it wasn't the kind of news that would drive us to even loftier levels," said Brian Williamson, an equity trader at The Boston Company Asset Management. "The war is by no means over; this is just one piece of the puzzle, and not a cause for a huge end-of-war celebration."
According to preliminary calculations, the Dow Jones industrial average closed down 19.34, or 0.2 percent, at 10,022.82.
The broader gauges were also lower. The Nasdaq composite index was down 30.74, or 1.6 percent, at 1,918.26, after surging nearly 1 percent earlier in the day. The Standard & Poor's 500 index was down 6.10, or 0.6 percent, at 1,068.04.
Overseas, Japan's Nikkei stock average finished 3.2 percent higher Monday following news of the arrest. The reaction was more muted in Europe, where major indexes lost ground after rising about 1 percent early in their sessions. France's CAC-40 closed up 0.6 percent, Britain's FTSE 100 rose 0.01 percent, and Germany's DAX index ended the day 0.4 percent higher.
The U.S. dollar also saw a mid-session reversal, rising early in the day before plunging to a new low against the euro. Gold rose in Europe, but later declined in New York.
Saddam's arrest could signal a turning point in Iraq, where U.S.-led forces have faced scattered resistance since troops entered Baghdad on April 9. But there were worrisome signs that the insurgents would continue their campaign, as a suicide bomber killed eight Iraqi policemen Monday at a station on Baghdad's northern outskirts.
Analysts said Saddam's capture may reduce resistance to U.S.-led troops in Iraq, which could lead to fewer disruptions in the nation's oil fields. The capture also could help ease lingering concerns about the economic recovery and persuade investors to take on more risk.
"These psychological things, like the Dow crossing 10,000 and the capture of Saddam Hussein, are exactly the types of things we need to draw individual investors from the sidelines," said Jeffrey Kleintop, chief investment strategist for PNC Advisors of Philadelphia. "At a gut level, this is one more risk that's out of the equation."
Strong economic data and solid corporate outlooks have already given domestic stocks a boost, but some analysts have questioned whether the valuations are justified. Interest rates also have remained a top concern, with many investors watching for the Labor Department's report on consumer prices, due Tuesday. The index is the government's most closely watched inflation barometer.
Analysts took heart that Monday's slow sell-off was not panic-driven. Jack Caffrey, equities strategist at J.P. Morgan Private Bank, said it underscored the caution of many investors.
"It feels like people are looking to get a little bit more defensive going into the holidays and to protect their gains," Caffrey said.
Few were warmed by the news from retailing titan Wal-Mart, which lost $1.76 to close at $50.74. The world's largest retailing chain said December growth at stores open at least a year was near the low end of its 3 percent to 5 percent projected range, and traffic was down for the week.
High-tech bellwether Oracle Corp. closed down 13 cents at $12.70, but gained 33 cents in after-hours trading after its quarterly earnings report beat analyst expectations by a penny. The company, which announced the results after the market's close, said profits were up on rising demand for its business software.
Dial Corp. closed up $2.50 at $28.38 on news that it has agreed to be purchased by Henkel, a German consumer products group, for about $2.9 billion in cash. The acquisition of the maker of Dial soap, Renuzit air fresheners and Armour Star canned meats would give Henkel a bigger foothold in the North American market.
McDonald's Corp. lost 36 cents to $25.42 after saying it would sell such non-McDonald's names as the Donato's Pizzeria chain, as part of a plan to refocus on its primary brand.
Decliners outnumbered advancers nearly 2 to 1 on the New York Stock Exchange. Volume was heavier, with 1.46 billion shares traded, compared with 1.22 billion shares on Friday.
The Russell 2000 index, which tracks smaller company stocks, was down 12.34, or 2.2 percent, at 535.25.
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