US stocks fall after Saddam capture boost

US stocks fell back last night, with technology stocks leading the market's retreat after an early burst of buying spurred by the capture of former Iraqi President Saddam Hussein.

The dollar, which had also enjoyed a brief rally, slumped to record lows against the euro when the frenzy sparked by Saddam's capture ebbed and investors focused on the US's continuing economic problems.

The Dow Jones eased 19.34 points, or 0.19 per cent, to end at 10,022.28, after earlier hitting a session high at 10,139.63, the Dow's highest level in 19 months.

The technology-focused Nasdaq was down 29.97 points, or 1.54 per cent, to 1,919.03, retreating further from the 2,000 level it briefly pierced two weeks ago.

Mr John O'Donoghue, joint head of block trading at Credit Suisse First Boston, said the market's reaction was more muted than it might have been had the capture come earlier in the year, before the market's heady gains.

The Nasdaq has risen 53.9 per cent higher since the end of the war, while the Dow and S&P 500 are each up 34 per cent.

Nonetheless, Mr Ian Winer, head technology trader at Banc of America Securities, said the market was likely to continue to drift higher through to the end of the year.

Analysts also said concern continues, despite some good economic indicators in recent weeks, that the US current account deficit is a major issue and continues to weigh on the dollar.

"The sensational images of Saddam Hussein's capture failed to evoke any sensational rally in the dollar due to the imbalance between the symbolic meaning of the capture and its practical implications on currency markets," according to Mr Ashraf Laidi, chief currency analyst at MG Financial Group in New York.

"Most importantly, the capture will neither alter the US twin deficits, nor alter the state of unattractively low US. Yields relative to their Australian, British, Canadian and euro zone counterparts," Mr Laidi added.

The Dow Jones gained just under 6 per cent in October, but outflows from US equities totalled $9.6 billion (€7.8 billion) in the month - the fourth consecutive net outflow, according to new figures.

Flows have been positive in only two separate months this year. Analysts said that the data showed a rebalancing of global portfolios.

US investors bought a net $8.3 billion of overseas equities in October, while foreign investors sold a net $1.3 billion of US equities.

In the first 10 months of the year, net outflows from US equities have totalled $50.8 billion, against a net inflow of $49 billion for the whole of 2002.

Net portfolio inflows into the US - stocks plus bonds - totalled $27.7 billion in October, well short of the $47 billion needed to fund the deficit each month.