Jitters Again Rock Travel Firm Stocks
It’s become an eerily familiar scene in the stock market and it happened again Monday: Fears of a terrorist attack prompt a quick and fierce sell-off of airline stocks and other terror-sensitive shares.
When the market opened Monday, minutes after a jetliner crashed into a New York neighborhood, jumpy Wall Street traders rushed to dump the shares of aviation, insurance, hotel and entertainment companies that could be hurt financially by a terrorist act.
Though airline stocks ended the day with large losses, shares of some other firms recouped most of their losses when it appeared the crash could have been an accident caused by mechanical failure.
The stock market itself also recovered much of the ground it lost early on. After giving up almost 200 points within minutes of opening, the Dow Jones industrial average ended the day down 53.63 points, or 0.6%, at 9,554.37. The Nasdaq composite index, after slipping 46 points early on, finished up 11.65 points, or 0.6%, at 1,840.13.
Nevertheless, the knee-jerk sell-off underscored how, in the aftermath of Sept. 11, investors tend to dump stocks in the same industry groups whenever a major potential terrorist incident occurs.
“Any time you get something that’s suspected of [terrorism], airlines, hotels and lodging, entertainment--they’re all prime candidates” for a sell-off, said David Briggs, head of stock trading at mutual fund group Federated Investors in Pittsburgh.
Airline stocks fell on the notion that fewer people would be willing to fly or take vacations far from home. That would mean fewer fliers for airlines, fewer guests at hotels and fewer tourists at theme parks, casinos and cruise lines.
The terror-related woes come on top of the hit that these industries have taken due to the struggling global economy.
Several times recently, such as when anthrax was first discovered in a Senate office building, traders immediately dumped stocks in those sectors even though details of the incidents were sketchy.
That was the case Monday. In frantic opening minutes of the session, traders said they heard conflicting reports about the airline and type of aircraft involved. Still, they pushed the sell button for all firms that could be affected.
Despite the absence of facts, “there’s a visual scene,” said James Raphalian, head of Nasdaq trading at SG Cowen Securities in New York. “You see flames. Your first thought is, ‘My God, what just occurred?”’
Some experts said the selling was intensified because the plane went down in New York.
“Because 75% of the people in [the stock-trading] business work in New York and the plane crashed in New York probably exacerbated the market impact,” Briggs said.
Some traders and other market watchers were encouraged by the market rebound, saying it is an indication that investors are coming to terms with terrorism. Hugh Johnson, chief investment officer at First Albany Corp., was pleased that stocks did not fall more than they did, and came back strongly.
“The markets are not immune to shocks. That’ll never occur,” Johnson said.
Airline stocks were hit the hardest Monday. AMR Corp., parent of American Airlines whose jetliner crashed, fell more than 9%. The Amex airline index sank 5.8%.
Shares of online travel agencies also were pounded. Travelocity.com declined 9.4%.
A Bloomberg News index of U.S. lodging companies slipped 1.8% while the Standard & Poor’s Corp. index of gaming stocks fell 0.7%.
Some stocks fell into brutal sell-offs in the morning, but later regained most of their losses. Aircraft maker Boeing was down as much as 5% but finished off just 0.5%. Cruise-line firm Carnival Corp. tumbled almost 9% on word of the crash, but ended the day down 0.6%. Insurance stocks managed to end the day up 0.1%.
The market rebounded as speculation grew that the accident was not terrorist-related, experts said. That gave courage to investors who have sat on the sidelines throughout the recent rally and were looking to get in.
