“Poll ratings on President Bush’s handling of the economy fell last week among the American voting public,” writes Michael Santoli in this week’s issue of Barron’s.

“Global investors’ opinion of his stance toward Iraq dropped at least as much. With both of these constituencies turning nervous, stocks and the U.S. dollar declined hard in a mutually reinforcing manner, dragging the broad stock gauges into the red for the young year.”

“Stocks were hit particularly hard Friday, as disagreement intensified among the White House, France, Germany, China, Russia and the United Nations on whether, or when, to forcibly disarm Saddam Hussein. The selling pressure weighed on a market without many eager buyers ahead of a week that holds great prospect for the continued diplomatic and military tensions to boil over.”

“The Dow Jones Industrial Average tumbled 455 points, 238 of them lost on Friday alone, for a 5.3% weekly decline. The Standard & Poor’s 500 index surrendered 40 points, or 4.5%, to reach 861. The Nasdaq fared a bit better than the broader market, thanks to some half-heartedly upbeat words from a few big tech companies. The index slid 2.5% to 1342.”

“The trading volume Friday was brisk — yet it didn’t reach the kind of frenzied level that would indicate raw panic by market players. But the selloff was more than enough to erase the gains the market made at the start of the year in the blue-chip benchmarks. The Dow and S&P are now back at levels last seen in mid-October — a week after the forceful bounce off lows that have, so far, not been revisited.”

“For 2003, the Dow is down 2.5% and the S&P 500 off 2.1%. The Nasdaq is clinging to the last of its torrid New Year’s rise and is up a half percent.”

“The dollar’s severe decline against the euro, to $1.08, and the related advance in the prices of oil and gold late in the week seemed to indicate that the equity market was largely a collateral victim of overseas investors cutting exposure to U.S. financial assets.”

” ‘What we are seeing via this repatriation of foreign assets amounts to an international vote of no confidence in the president,’ says Barry Ritholtz, chief market strategist at Maxim Group, a brokerage firm that serves an international clientele.”