An anthrax scare in New York sent the stock market into an early tailspin Friday, but an afternoon rebound helped major stock indexes post their first three-week winning streak in more than a year.
After largely erasing their post-Sept. 11 losses with a strong rally Thursday, stocks finished mixed on Friday. The Dow Jones industrial average, off as much as 216 points early on, closed down 66.29 points, or 0.7%, to 9,344.16.
The Nasdaq composite index, also down sharply at one point, managed a small gain, rising 1.93 points, or 0.1%, to 1,703.40. The Standard & Poor’s 500 index closed at 1,091.65, down 5.78 points, or 0.5%.
Losers outnumbered winners 3 to 2 on the New York Stock Exchange and 5 to 4 on Nasdaq. Trading volume was moderate.
For the week, the Dow was up 2.5%, though it remains 261 points below its level before the attacks. Nasdaq climbed 6.1% for the week, and is 8 points above its pre-Sept. 11 level. The S&P; 500 gained 1.9% for the week, but ended about a point shy of its Sept. 10 close.
The market fell at the open as the Commerce Department reported that retail sales dropped a more-than-expected 2.4% last month. Stocks also were hurt by a profit warning from credit-card company Providian Financial, whose shares tumbled $6.90 to $13.45 after the firm said cash-strapped borrowers are having problems paying off their bills.
However, the market’s biggest jolt came around 8:45 a.m. PDT as news broke that an NBC News employee in New York had contracted a rare skin form of anthrax.
The Dow fell almost 100 points in about seven minutes immediately after the first reports were broadcast. Stock prices stabilized over the next hour and rebounded later in the day when the anthrax exposure did not appear to be widespread.
The anthrax-related swoon mirrored other incidents in recent weeks in which stocks sank into short-lived sell-offs when it appeared that terrorist acts were unfolding. Among the scares: a report, which later proved inaccurate, that an airliner had been hijacked in India; the explosion of a Russian commercial jet over the Black Sea; and a small-scale anthrax outbreak in Florida.
Friday’s anthrax scare demonstrated that Wall Street remains nervous about terrorism and that stocks might fall sharply if a second major attack occurred in the U.S., experts said.
“This gave a little indication today that the market is not ready for another massive terrorist attack,” said Jon Brorson, director of stocks at the Northern Funds mutual fund group. “Emotions are rubbed raw, and the market is very sensitive.”
Some experts said Friday’s sell-off was intensified by the fact that the anthrax incident occurred in New York, where many stock traders are based. But they predicted that stocks would fall whenever a domestic terrorist assault appears to be developing.
“We’re going to have a lot of knee-jerk reactions,” said Art Hogan, a market strategist at Jefferies & Co.
On Friday, stocks of companies whose products may be used in the fight against biological weapons rallied. Shares of Cepheid Inc., which makes equipment that detects contaminants in food and water, surged $2.31 to $7.78. Genelabs Technologies Inc., which sells compounds that target DNA in bacteria and viruses, rose 41 cents to $2.39. Nanogen Inc., a biomedical equipment maker, climbed $1.05 to $8.61
However, shares of shipping companies such as FedEx Corp. and United Parcel Service Inc., which fell hard after the anthrax news, failed to regain all the ground they lost. FedEx was off $1.61 to $38.09, while UPS slid $1.84 to $50.95.
Investors also were spooked by news showing that retail sales last month experienced their biggest drop in nearly a decade of record-keeping, a sign that the economy is faltering in the aftermath of the attacks.
Separately, the Labor Department reported that wholesale prices climbed unexpectedly in September because of higher costs for energy and automobiles. However, some experts dismissed the report, saying inflation is not a problem at the moment.
Meanwhile, consumer confidence rose in October from its extremely depressed level in September, according to the University of Michigan. The school’s consumer-sentiment index rose to 83.4 from 81.8 last month.
In other market highlights:
* Airline stocks, which have rallied in recent weeks, were off sharply. AMR, parent of American Airlines, fell $1.69 to $20.51; UAL, owner of United Airlines, lost $1.47 to $18.63; and Delta Air Lines fell $2.03 to $25.80.
* In its first day of trading, TheraSense rose $5.92 to $24.92--a 31% gain. The Alameda, Calif.-based maker of diabetes monitors was the second company to go public since Sept. 11.
* Commodity markets also reacted to the anthrax scare. Gold, which had fallen in recent days, gained $3.10 an ounce to $284.90. Oil fell 84 cents a barrel to $22.50 on worries that bioterrorism fears might keep people close to home.
* Shares of Santa Barbara-based Earthshell, which makes biodegradable food containers, rose 23 cents to $2.24 on news the company will conduct test sales of some of its products in Wal-Mart stores next month.
Bloomberg News was used in compiling this report.
Market Roundup, C4