NEW YORK — Wall Street retreated Wednesday, declining for the first time in three sessions as investors worried that unresolved questions about Iraq will stifle corporate spending critical to the economic recovery.
“It’s short-term profit-taking after the last two days of rallies,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “The market is just going to bounce around until we have some kind of military action in Iraq.”
The Dow Jones industrial average declined 40.55, or 0.5 percent, to close at 8,000.60, having gained 291 points the last two sessions to reach its highest level in two weeks. Earlier in the day, blue-chip stocks lost as much as 105 points.
The broader market also finished lower. The Nasdaq composite index fell 12.22, or 0.9 percent, to 1,334.32. The Standard & Poor’s 500 index declined 6.04, or 0.7 percent, to 845.13.
Tensions with Iraq have pressured the market for weeks, although stocks rose sharply the previous sessions on investors’ belief that a war is not imminent. Still, analysts say the prospects of war and its effect on the economy continue to weigh on the market.
On Wednesday, U.N. weapons inspectors hunted for banned Iraqi missiles, visiting at least three sites. The United States and Britain say they plan to press this week for a U.N. Security Council resolution authorizing the use of force to disarm Iraq.
“All the economic and company news that we’ve seen have been overshadowed by developments from the Middle East. Clearly that’s the 800 pound gorilla ... dominating all investment decisions,” said A.C. Moore, chief investment strategist for Dunvegan Associates.
“I don’t see the markets going far with that confrontation hanging,” he added. “I would think the markets may not do well unless there’s a fairly short-term successful confrontation.”
Investors shook off a Commerce Department report Wednesday showing construction of new homes and apartments rose in January to the highest level in 16 years.
Wachovia dropped 39 cents to $35.26 after the bank agreed to acquire the brokerage unit of Prudential Financial. Prudential lost 61 cents to $30.31.
Qwest slid 32 cents to $4.05 after reporting a fourth-quarter loss that was narrower than analysts’ expectations; however, its revenue also plunged 11 percent as the regional phone company’s core business remained sluggish.
InVision Technologies declined $2.36 to $20.94 after S.G. Cowen downgraded the company’s stock to “underperform” from “outperform,” citing a lower allocation of government funds for bomb-detection devices.
Gainers included semiconductor makers Intel, up 9 cents at $16.80, and Texas Instruments, up 17 cents at $16.41, after Morgan Stanley raised their ratings.
Micron Technology climbed 27 cents to $7.44 after the second largest computer memory chip maker said it will cut 10 percent of its labor force of 18,000.
Declining issues outnumbered advancers 9 to 5 on the New York Stock Exchange.
The Russell 2000 index, a barometer of smaller company stocks, fell 4.25, or 1.2 percent, to 360.28.
Overseas, Japan’s Nikkei stock average finished 0.2 percent lower Wednesday. In Europe, France’s CAC-40 fell 2.7 percent, Britain’s FTSE 100 lost 1.9 percent and Germany’s DAX index slid 4.2 percent.