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Stocks pull back after Secretary of Defense makes comments

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The major indexes have given back roughly one-half of their gains not long after the Associated Press quoted Secretary of Defense Rumsfeld as saying that he "would expect that there would be guard and reserve call-ups in the immediate period ahead," which suggests to many that the Bush Administration continues to prepare for war with Iraq.

The news found the Dow Industrials (INDU) 8,607 +1.05% giving back roughly 100 points after trading a session high of 8,730 just two hours ago, while the S&P 500 Index (SPX.X) 911 +1.2% holds an 11-point gain with the NASDAQ-100 Index (NDX.X) 1,054 +3.49% trading just off its highs of 1,070.

The Fiber Optic Index (FOP.X) 43.48 +5.61% remains today's sector winner, with the Airline Index (XAL.X) 41.01 +5.2% trading strong despite an LA Times report that 5 travel agencies are suing major U.S. airlines and online travel site Orbits for anti-competitive practices and have asked a federal judge to certify their lawsuit as a class action. The lawsuit seeks to dissolve Orbitz, which is owned by AMR $5.62 +8%, UAL $3.10 +21%, DAL $11.27 +4.83%, NWAC $7.52 +5%, and CAL $7.89 +13%.

Sector weakness remains in the retailing group as depicted by the S&P Retail Index (RLX.X) 281 -2.15% and Retail HOLDRS (AMEX:RTH) 73.65 -2.35%. Earlier today, Goldman Sachs expressed caution on hardline retailers, including Home Depot (NYSE:HD) $27.12 -4.5% and Lowes Companies (NYSE:LOW) $41.28 -1.94%.

Oil service stocks as depicted by the Oil Service Index (OSX.X) 83.64 -2.61% are also weak. Shares of Halliburton (NYSE:HAL) $16.41 -4% have turned lower on rumor that the company's CEO will step down, perhaps as early as Thursday. If true, traders speculate that the resignation by the CEO before asbestos litigation is wrapped up, then many would conclude that a negative ruling could be forthcoming.

Jeff Bailey

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