Wall Street is beginning to get nervous over rising international uncertainties - terror bombs in Europe, what seems to be chaos in some parts of Iraq, and new uncertainties in Israel.
So far that nervousness has resulted in some roller-coaster days, not a full-fledged retreat. In fact, for the first three months of the year the market is up about 2.5 percent, reflecting optimism over corporate earnings, and violence overseas has yet to cause blips in the US economy.
But Wall Street professionals caution that problems overseas have the potential to ignite problems at home.
"In the end, it is a question of confidence in the administration," says Robert Hormats, vice chairman of Goldman Sachs International. "It's more ... psychological."
In recent days, however, the news has turned grimmer. Fighting is widespread in Iraq, and pictures of US servicemen being carried out in body bags appears on the front pages. On the terror front, investigators have identified the Madrid bombing's ringleader, an individual who is believed to be on the loose.
"It's all highly disturbing," says Bob Brusca, an economist at Fact and Opinion Economics. "There are a lot of hot spots."
Many Wall Street professionals admit the uprising in Iraq is confusing. "I can't figure out if the majority [of Iraqis] are with us or if the whole thing is so fragile they are going the other way," says Anthony Dwyer, an equity strategist at FTN Midwest Research Securities Corp. in New York. "Hopefully, we'll get a handle on this."
Despite the confusion, Mr. Dwyer doesn't think it's hurt the stock market; most indexes are near their highs. "Maybe there is a dampening on the upside potential," he suggests.
Jeffrey Kleintop, chief investment strategist at PNC Advisors in Philadelphia, thinks the market will begin to focus on the overseas situation once the earnings season ends later this month and the April employment numbers are reported.
"If we have another good employment report in April, investors will say, 'What's next now that we're not worried about labor?' " Mr. Kleintop thinks this may be when the market starts to focus on the Iraq battles. "There could be a pullback in the future when the headlines are probably going to be just as stark as they are today," the strategist says.
Kleintop also believes the fighting in Iraq is part of a jockeying for power as rival groups try to show that they should be included in the new government that will take over the country at the end of June. "Some of them believe that government is not reflecting their religious beliefs."
Although the stock market has had some setbacks after recent terror events in Europe, it has generally bounced back. "There will be minor corrections unless Americans feel threatened," Kleintop says.
Consumer concerns are not yet showing up in the economy. Recent retail numbers are running well ahead of last year, when the US was preparing for war. Consumers have been spending their tax refunds on everything from rollerblades to new cars.
The Conference Board, a business research group, has not seen concerns about Iraq crop up in its consumer surveys. "It may show up in April," says Lynn Franco, director of the Board's Consumer Research Center, "since up to now the news has not been as negative as it has in the last few days."
In the recent past, wars have not kept Americans from hitting the malls. The Conference Board began its consumer surveys in the late 1960s during the Vietnam War. "We had some of the highest consumer confidence levels on record during that time," Ms. Franco says.
The information age has also changed the way consumers react, she says. For example, around-the-clock news coverage and the Internet did not exist in the '60s. Today, consumers can watch wars and terrorists attacks replayed every hour. "The constant repetition minimizes the shock value," she asserts.
Mr. Hormats, however, worries that the US economy simply may not have enough elasticity to survive another terrorist attack on US soil.
After 9/11, Washington quickly increased spending to help get the US economy back on its feet. There was relief for airlines, and a major increase in defense spending. Now, he says the large budget deficits make it "harder to employ fiscal stimulus."
Hormats also worries about the increasing US isolation over its policy in Iraq.
He was in Britain last week and found a deterioration of public support for the US.
"The American people have not been apprised of the sustained costs [of reconstruction]," he says. "Over the near term, this doesn't mean a lot. But, over the longer term, it may mean the US has to pay more for the reconstruction or debt forgiveness, so it presents us with a higher tax bill."
"We will be paying for Iraq," he adds, "for a very long time."