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Investors Respond to Prospect of War - 2003-03-18

For the fourth session in a row, stock prices closed sharply higher on Wall Street Monday. Investors are responding to the prospect of a swift and successful war against Iraq. In very heavy trading the Dow Industrials rose 282 points to close at 8,142. The market has now gained 600 points in the last four sessions.

Analysts say investors are looking back to the sustained rally following the 1991 war that forced Iraqi forces out of Kuwait. But Art Cashin, of Paine Webber in New York, tells CNBC television he is not convinced that the market will continue to rally as it did 12 years ago. Then, says Mr. Cashin, it was not at all certain that the U.S. forces would be successful. "So (then, in 1991) you got a sigh of relief rally in those first few hours, when you said, my god, this is not going to be a complicated matter," he says. "Now, everybody is going into this assuming absolute military superiority. You're not going to get that bonus coming out of it."

But for now the market is going up, propelled by the end of uncertainty.

Oil prices were down sharply Monday, with west Texas intermediate losing 45 cents in New York to under $35 a barrel. Oil prices have declined sharply for two consecutive sessions.

The dollar, which has been weakening on currency markets over the past year, rallied Monday and posted its biggest one-day gain against the euro in two months. The dollar was also up against the yen and the Swiss franc.