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War Winds Blow Down Stocks

After an initial spike, the averages fall after Colin Powell brings his case to the U.N.

Updated from 4:05 p.m. EST

Stocks ended lower Wednesday as Secretary of State Colin Powell's briefing before the U.N. Security Council ultimately failed to lift the uncertainty surrounding a possible war with Iraq.


Dow Jones Industrial Average

ended down 28 points, or 0.35%, to 7985, while the


was down almost 5 points, or 0.36%, to 1301. The

S&P 500

fell 4 points, or 0.54%, to 843. Earlier, the Dow had been up as much as 139 points while the Nasdaq had climbed almost 2%.

"I didn't understand why we were up to begin with," said Sean Martin, head trader at A Gary Schilling & & Co. "We're going to war."

Martin said concerns about North Korea and warnings about possible terrorist attacks have also weighed on stocks. U.S. counterterrorism officials warned that attacks on U.S. soil are more likely as a result of possible military action in Iraq, according to



In his U.N. Security Council briefing Wednesday morning, Powell played a Jan. 30 audio recording of conversations that he said were between Iraqi officers discussing "forbidden ammo." He also displayed satellite photographs that he said illustrate how Iraq has been lying about its weapons program. He said Iraq has made "no effort" to disarm, adding that the country has at least 7 bio-weapons laboratories.

"They are inspecting ammunition you have ... for the possibility there are forbidden ammo," said one voice that Powell identified as Iraqi official. "We sent you a message yesterday to clean out the areas, scrap areas, abandoned areas, make sure there is nothing there."

Traders and analysts were initially optimistic following Powell's speech, which raised hopes for multilateral action against Iraq.

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"Hopefully, when we come out of this, the Security Council will be unified in their condemnation," said Tony Cecin, head of equity trading at US Bancorp Piper Jaffray.

That will either move Iraq to fully disarm or prompt the U.N. to do the job itself, Cecin added. Still, Powell also intimated in his presentation that the U.S. is prepared to act alone if necessary and the possibility of a unilateral approach seemed all the more likely as other nation's made their feelings clear.

China said the Security Council must let inspectors go on with their work and Russia and France echoed these sentiments. For its part, Iraq dismissed Powell's evidence as "assumptions and presumptions" which offered "no new evidence." Investors must now wait for a Feb. 14 presentation by chief U.N. inspectors Hans Blix and Mohammed ElBaradei.

A weak information-technology spending outlook from


(CSCO) - Get Cisco Systems, Inc. Report

added to the cautious tone Wednesday. The networking company beat revenue and earnings estimates for its just-completed second quarter, but warned that third-quarter revenue would be flat or down 3% sequentially, and said no real recovery would materialize before the global economy turned around. Cisco rose 0.08% to $13.20.

In other corporate news,



posted a slight profit for the fourth quarter compared to with sharp loss in the year-earlier period. Still,

The Wall Street Journal

reported that the firm's two top executives were forced out last week amid questions over their use of a type of tax shelter that is under scrutiny by the Internal Revenue Service. Investors had believed that Chief Executive William Esrey was leaving because he had been diagnosed with lymphatic cancer, but in fact, his departure was unrelated to his medical condition. Shares rose 1% to $12.52.

El Paso


plunged 22.5% to $6.20 after the firm cut its dividend, lowered earnings expectations and said it would sell another $3 billion in assets to pay down debt.

Circuit City

(CC) - Get Chemours Co. Report

skidded 11% to $5.86 after warning that fourth-quarter profits will miss expectations and announcing 3,900 job cuts.

In economic news, the Institute for Supply Management's nonmanufacturing index came in at 54.5 in January compared with a revised 54.2 in December. Economists were expecting a reading of 54. Meanwhile, the employment index broke above 50 for the first time in 22 months, rising to 50.3 from 46.9 in December.

The 10-year Treasury note was down 2/32 to yield 3.93%.

Volume on the Big Board reached 1.4 billion shares, with decliners beating advancers by 9 to 7. On the Nasdaq, 1.35 billion shares changed hands with losers outpacing winners by 17 to 14.

Overseas markets ended higher on the heels of Powell's speech, with London's FTSE 100 up 2.4% to 3678, while Germany's Xetra DAX was adding 3.7% to 2730. In Asia, Japan's Nikkei was up 0.8% to 8550, while Hong Kong's Hang Seng was down 0.8% to 9180.