Market Drops, Then Recovers as Fears Subside
Monday’s air disaster in New York gave Wall Street a sharp reminder that more terrorist attacks are possible and sparked a steep, early sell-off, although stocks regained their footing as news reports indicated terrorism did not appear to be the cause of the crash.
“Fears are running high,” said Alan Ackerman, executive vice president of Fahnestock & Co. “We’re dealing with a bruised U.S. psyche, whether it is at the consumer level or the investor level.”
The Dow Jones industrial average closed down 53.63 points, or 0.6%, at 9,554.37, after dropping as much as 198 points in early trading. The American Airlines plane crashed at 9:17 a.m. EST, 13 minutes before the stock market opened.
The broader market was mixed. The Nasdaq composite index rose 11.65 points, or 0.6%, to 1,840.13, having been down as much as 46 points. The Standard & Poor’s 500 index slipped 1.98 points, or 0.2%, to 1,118.33, having declined as much as 21 points.
Losers barely edged winners on the New York Stock Exchange and were even on Nasdaq. Trading was light.
The cause of the crash, which occurred near John F. Kennedy International Airport, was not immediately known. However, some investors, worried that it might have been the result of a terrorist attack, began selling right away.
By early afternoon the market had recovered much of its losses as reports indicated that terrorists were not involved. Witnesses reported hearing and seeing an engine fall off, and investigators suggested the noise was caused by a catastrophic mechanical failure. A senior Bush administration official, speaking on condition of anonymity, said: “It’s looking like it’s not a terrorist attack.”
Analysts were encouraged by the market’s recovery, especially since stocks were expected to pull back after rallying for several weeks.
“It’s pretty impressive--the market’s resiliency--especially after last week’s advance,” said Jon Brorson, director of equities at Northern Trust.
Investors had been buying on increasing confidence about an economic turnaround in 2002. On Friday, the Dow posted its highest close since the Sept. 11 terrorist attacks, joining the rest of the market’s major indicators in closing above pre-attack levels.
But analysts said other investors, wary of making bigger commitments to stocks until terrorism is officially ruled out as a cause of Monday’s crash, sat out the session, making volume lighter than usual.
Meanwhile, investors could not turn to the safety of bonds, because the government bond market was closed Monday in observance of Veterans Day.
Analysts say the market’s post-Sept. 11 comeback still is vulnerable to investors’ persistent fears about the possibility of more terror attacks and the spread of anthrax, which began soon after the attacks.
Among Wall Street’s biggest losers Monday were airlines and the companies that supply them. American’s parent, AMR, lost $1.64 to $16.49, and Delta Air Lines sank $2.72 to $23.27.
General Electric, which made the engines in the plane that crashed, fell 98 cents to $39.43. United Technologies, also a supplier of jet engines, tumbled $1.76 to $55.30.
Leisure-related stocks also suffered as investors worry that skittish consumers will take fewer vacations.
Gainers included some key technology stocks. Microsoft rose 58 cents to $65.79, and IBM added 78 cents to $114.86. Optical networker Ciena rose $1.65 to $18.83, after reaffirming fourth-quarter earnings expectations in line with analysts’ forecasts and announcing it was cutting 380 jobs.
In other market highlights:
* Energy companies Dynegy and Enron traded higher on news of their merger. Dynegy surged 14%, up $5.55 at $44.31, and Enron gained 61 cents, or 7%, to $9.24.
* Losses on European markets widened following the crash in New York. France’s CAC-40 finished the day down 3.1%, the FTSE-100 in Britain fell 1.9% and Germany’s DAX index declined 1.8%.
* Oil company shares fell as crude prices dipped 99 cents a barrel to $21.23 in New York trading, on continuing worries about a global glut. Exxon Mobil lost 19 cents to $40.06 and Kerr-McGee was off 17 cents at $57.29. The CBOE index of 11 oil company stocks was down 1.1%.
* Shares of companies in security-related businesses rose on renewed concerns over airline safety. Visionics, which makes ID systems, rose $1.31 to $14.15; Internet Security Systems, which makes security software, gained $3.05 to $28.80; and Viisage Technology, another ID system developer, was up $1.24 to $10.28.
* Gold prices temporarily shot up more than $3.50 an ounce to a one-month high of $281.40 as investors sought safe havens. Gold futures closed at $278.30 an ounce. The S&P; index of gold and precious metals stocks jumped 1.3% during the session but finished flat as investors locked in profits in stocks such as Newmont Mining, which rose to $24.24 but finished at $23.30, up 1 cent.
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Market Roundup: C11, C12
