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. Last Updated: 07/27/2016

U.S. Markets Dip on Powell Speech

NEW YORK -- Stocks and bonds fell as a war with Iraq grew more likely after U.S. Secretary of State Colin Powell brought Washington's case against Iraq to the United Nations.

World oil prices rose 1 percent and the dollar, which had sunk to its lowest level in nearly four years against the euro, rose on views that Powell's testimony would rally support worldwide.

Powell's presentation, a bid to win over anti-war sentiment at home and abroad as well as among governments, included satellite photos and covertly taped conversations that he said showed that Iraq was hiding banned weapons from inspectors.

Stocks climbed during the address Wednesday as investors hoped the evidence would convince other nations to support a war, but the market took a tumble after Iraq's information minister said the allegations were "hollow."

The dollar pared gains, but remained firmer on the day.

Iraq's rebuttal added to jitters that war with Iraq may be longer and more costly than anticipated, investors said.

"This [war] is not going to be easy. It's not going to be short and it's not going to be limited," said Hugh Johnson, chief investment officer at First Albany Corp.

The blue-chip Dow Jones Industrial Average erased a 1.6 percent gain to fall 28.11 points, or 0.35 percent, to 7,985.18. The broader Standard & Poor's 500 Index gave up 4.61 points, or 0.54 percent, at 843.59. The technology-laced Nasdaq Composite Index, which had gained more than 2 percent, closed down 4.67 points, or 0.36 percent, at 1,301.48.

Declining stocks beat out advancers by a ratio of 9 to 7 on the New York Stock Exchange and Nasdaq. Trading was moderate, with 1.42 billion shares changing hands on the Big Board, and 1.35 billion traded on Nasdaq.

"There was some general optimism over Powell's speech, and that's rapidly dissipating into reality again -- the fact that we're probably going to load up the ships and start pointing the guns pretty soon," said Tony Cecin, head of equity trading at U.S. Bancorp Piper Jaffray.

The dollar settled at $1.0782 per euro and 120.02 per Japanese yen, up from $1.0879 per euro and 119.73 yen late Tuesday.

February gold ended $2.60 lower at $376.40 an ounce on profit taking after rising to 6 1/2-year highs. At the New York Mercantile Exchange, U.S. light crude rose 35 cents to $33.93 per barrel, around $1.30 below two-year highs struck last month.