Features

Market resumes trading, Dow tumbles more than 680

By Amy Baldwin AP Business Writer
Tuesday September 18, 2001

NEW YORK — The losers included airline, insurance and entertainment stocks while defense issues were among the few winners when prices tumbled on Wall Street Monday, the first day of trading after last week’s terrorist attacks. 

The selling, in record volume on the New York Stock Exchange, gave the Dow Jones industrials their biggest one-day point drop, 684.81, and left them below 9,000 for the first time in more than 2 1/2 years. 

“To buy stocks you need some kind of clarity and confidence, and right now you’ve got neither,” said Bill Barker, investment consultant at Dain Rauscher in Dallas. “The buying public is sitting on its hands. The sellers are obviously in control now.” 

Analysts were unsure how long the selling would last or how intense if might become. Following last week’s attacks, investors have more reason to worry about shrinking profits, not to mention national security. 

Monday’s selling could have been worse, something that was apparent in the number of stocks that fell vs. those that rose. The ratio of decliners to advancers was close to 6 to 1, typical of the Wall Street’s recent selloffs; in the Oct. 19, 1987 crash, the ratio was 50 to 1. 

“This is about what we could have expected,” said Todd Clark, co-head of listed trading at WR Hambrecht. 

Still, he said, “I think traders are disappointed we didn’t rally a bit in the afternoon. There was some thinking that we would do that,” Clark said. 

The Dow closed at 8,920.70, having suffered a 7.1 percent decline. Its nearly 685-point loss surpassed the previous record one-day point drop of 617.78, set on April 14, 2000. The last time the blue chips were below 9,000 was Dec. 3, 1998. 

The Dow also set a record for an intraday point decline, 721.56, beating the previous record of 721.32, also set on April 14, 2000. 

By percentage, however, the Dow’s loss was less severe, ranking 14th and equaling less than a third of the biggest-ever percentage drop of 22.6 percent in the 1987 crash. 

The Nasdaq composite index fell 115.83, or 6.8 percent, to 1,579.55, a level not seen since Oct. 14, 1998 when it closed at 1,540.97. The Standard & Poor’s 500 index, the broadest measure of Wall Street, declined 53.77, or 4.9 percent, to 1,038.77. 

Some market watchers said there are several reasons, including deeply discounted stock prices and patriotism, to hope for a rally. 

“I have heard brokers say their clients are saying, ‘I want to buy something to show my support in our economic systems,”’ said Larry Wachtel, market analyst at Prudential Securities. 

Investors had to digest a great deal of news Monday, including a half-point interest rate reduction — the eighth cut this year — by the Federal Reserve before the market reopened, along with a litany of companies announcing stock buybacks to boost their share prices. 

Analysts said U.S. investors were ready to get back to trading after a four-day shutdown, anxious to adjust their portfolios amid the uncertainty about the market, the economy and the overall market. 

The stock market’s closure, necessary as damaged utility services were restored and investment firms scrambled to find alternate places to do business, was also needed to give investors some time to separate their emotions from their investments, analysts said. 

“There has been a four-day hiatus, which takes a little bit of the panic out of it. ...Of course, the Fed cutting rates, while it wasn’t unexpected, it was helpful,” Wachtel said. “It’s not going to be a disaster.” 

Analysts noted that high-tech shares fared relatively well. 

“It’s certainly a positive that what’s holding up best is the Nasdaq. If you were thinking there was panic, you would see more dumping there,” said Richard A. Dickson, technical analyst for Hilliard Lyons in Louisville, Ky. 

Airline stocks traded lower after all the major U.S. carriers, expecting a drop in business, announced reduced flight schedules. UAL, the parent of United Airlines, fell nearly 43 percent, down $13.32 at $17.50, and AMR, the parent of American Airlines, plunged $11.70, or 39 percent, to $18. 

Airlines weighed on the Dow Jones transportation index, which fell 15 percent, down 404.81 at 2,271.68. 

Other travel and leisure services suffered, including online travel agent Expedia, down $12.25 at $24. Marriott International fell $8.60 to $32.25. 

Insurers were weak as the industry faces steep losses following last week’s attacks. American International Group fell $3.26 to $71 after saying last week it expects its pretax losses from the attack to total $500 million. 

Financial companies also traded lower on the expectation that investors and consumers will invest, spend and borrow less amid greater uncertainty about the economy. Dow industrial American Express sank $4.76 to $30.25. AmEx fell further in the extended-hours session, down $1.25, after issuing a third-quarter profit warning. 

Entertainment stocks were weak as investors expect business to suffer if the economy goes into recession. Disney, also a Dow stock, fell $4.33 to $19.25. 

There were some winners, chiefly in defense and security, which could see an uptick in government spending following the attacks. Defense contractor Lockheed Martin rose $5.63 to $43.95. InVision Technologies, which makes systems used in detecting bombs, surged 165 percent, rising $5.14 to $8.25. 

Following the devastation in the Financial District, the NYSE and the Nasdaq tested their trading systems and those of their member firms to ensure they were operating properly and would be able to process trades. It was not immediately clear if there were any glitches that prevented investment firms from executing trades, although some smaller companies were still without phone service. 

In a move to support the market, the Securities and Exchange Commission eased rules governing stock buybacks by companies. Several firms announced plans to repurchase their stock as a signal of their confidence in their own shares, as well as the market and the country. 

Companies that announced buybacks included networker Cisco Systems, which fell 47 cents to $14, and Starbucks, down 94 cents at $15.51. 

NYSE volume came to a record 2.33 billion shares, nearly doubling the 1.24 billion that were traded the previous Monday and surpassing the previous volume record of 2.13 billion on Jan. 4. Consolidated volume, which includes trades made on and off the NYSE floor, totaled 2.73 billion shares, well ahead of 1.5 billion last Monday. 

The Russell 2000 index, the barometer of smaller company stocks, fell 21.69 to 417.67. 

Overseas markets were mixed Monday. Japan’s Nikkei stock, which had closed before the U.S. markets reopened, average tumbled 5 percent. European stocks rose strongly with Britain’s FT-SE 100 rising 3.0 percent, France’s CAC-40 climbing 2.7 percent, and Germany’s DAX index gaining 2.9 percent.