The US military on Tuesday calmed jittery financial markets for the second time in a week by denying a rumor that the US had sent special forces into Iraq.
"We have no US troops in Iraq," said a Pentagon spokesman, Marine Lieutenant Colonel Dave Lapan.
The rumor had its biggest impact on the US markets. Thirty minutes into the trading day, the firming exchanges did an about-face and turned sharply lower.
"There is a rumor that US special forces are on the ground in Iraq. I heard they are on the ground in the northern Kurdish safe-haven area," said Ahmet Okumus, president of New York-based hedge fund Okumus Capital LLC, with US$520 million in assets under management.
At 10am, the Dow Jones industrial average reached a session-high 10,187 points -- a gain of 41 points. Over the next 20 minutes, the Dow tumbled to a session-low of 10,034, a drop of 112 points and a downward swing of more than 150 points. The market recovered partially, but remained in the red, after the Pentagon denied that there were troops in Iraq.
"It certainly was the rumor that was the cause of it getting knocked down in a heartbeat and when they denied it, we recovered about 60 points in a heartbeat," said Ned Collins, head of trading at Daiwa Securities America.
Last Thursday, the Pentagon denied a similar rumor that US special forces were in Iraq. The rumor had moved prices in the energy and metals markets.
Speculation has grown that Iraq is the next US target in the war on terror after President George W. Bush described the country last month as part of an "axis of evil" with Iran and North Korea. Bush accused the three countries of developing weapons of mass destruction and supporting international terrorism. He said action will be needed if they threaten the US.
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