(Updates to mid-morning)
By Denise Duclaux
NEW YORK, March 20 (Reuters) - Stocks fell on Thursday, pressured by travel and leisure shares hours after the United States unleashed a war on Iraq that President George W. Bush warned may be longer and more difficult than some had thought.
Bush began a war to topple Saddam Hussein with dawn air strikes on Baghdad that hit "selected targets." He said the U.S. military would seek a swift victory but warned that the war may be "more difficult than some predict." U.S. officials said an all-out air and ground offensive might be days away.
Hopes the war will be brief boosted the Dow 741 points over the previous six sessions. But worries remain that Saddam may torch oil fields, U.S. forces could get bogged down and the war might spark attacks on the United States. Questions also swirl around the health of the U.S. economy after the war ends.
"This whole rally where the Dow was up for six straight days, that was short covering and anticipation that we're going to be in and out of Iraq and then the global economy will recover," said Steve Kolano, equity trader at Mellon Growth Advisors. "Bush put a damper on that."
The broad Standard and Poor's 500 index fell 10 points, or 1.25 percent, to 863. The blue-chip Dow Jones industrial average lost 93 points, or 1.12 percent, to 8,172. The tech-laced Nasdaq Composite Index sagged 15 points, or 1.12 percent, to 1,381.
Walt Disney Co. skidded 51 cents, or 3 percent, to $16.46, and helped lead the Dow lower. The entertainment giant cut its profit target for 2003, saying war fears were hurting its theme parks business and that expected growth in the economy had stalled.
Continental Airlines Inc. dropped 14 cents, or almost 3 percent, to $5.06 after saying it would cut 1,200 jobs, with the possibility of more if war is prolonged. Other airlines followed the downward trend as carriers across the globe prepare job cuts and selective fare increases to see them through the latest turbulence.
Hotel stocks slumped on concerns the war would keep potential vacationers at home. Marriott International fell 58 cents, or almost 2 percent, to $31.41. Starwood Hotels shed 42 cents, or more than 1 percent, to $24.59. Hilton Hotels Corp. fell 35 cents, or almost 3 percent, to $11.85.
Cisco Systems Inc. fell 29 cents, or 2 percent, to $13.93. The Web gear heavyweight said it would acquire Linksys Group, a privately held provider of home networking products, for about $500 million in stock.
General Motors Corp. , a Dow member, fell 71 cents, or 2 percent, to $33.39. Investment bank Bear Stearns cut its full-year 2003 earnings forecast for GM because of weak March sales and the likelihood of further production cuts by the world's largest automaker. Rival Ford Motor Co. dropped 25 cents, or 3 percent, to $7.38.
El Paso Corp. proved a bright spot, rallying 71 cents, or almost 13 percent, to $6.21. The Federal Energy Regulatory Commission said it plans to issue a decision on March 26 on whether El Paso withheld natural gas supplies from California during the state's energy crisis in 2000-2001. (With additional reporting by Doris Frankel, Vivian Chu)