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17.09.2001, 16:36

Dow, Nasdaq declines exceed 5%; airlines, insurers take hits

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Wall St. absorbs loss

Dow, Nasdaq declines exceed 5%; airlines, insurers take hits

September 17, 2001: 10:29 a.m. ET

NEW YORK (CNNfn) - Major U.S. stock indexes fell more than 5 percent in early Monday trading as investors got their first chance to react last week's deadly terrorist attacks, betting the assault will hurt an already weak economy and corporate profits.

The Dow Jones industrial average tumbled more than 500 points while the Nasdaq composite index declined nearly 100 points.

As Wall Street returned from a four-day trading suspension, the Federal Reserve cut interest rates by half a percentage point, its eighth cut this year. The move came amid reassuring words from influential officials in government and finance, and announcements that companies will buy back their shares.

But those moves did little to reassure investors.

"We've been preparing for this selloff for several days now," said Art Hogan, chief market strategist at Jefferies & Co. told CNN. "We look for stabilization of down around 5 percent."

Money fled airlines and insurers, the two business most affected by the attack's disruption of travel and losses to life and property. But drug stocks edged higher.

At 10:20 a.m. ET, the Dow Jones industrial average fell 602.40 to 9,003.11. The Nasdaq composite index, while down a significant 93.13 to 1,602.17, was off its lows of the session. The Standard & Poor's 500 index shed 52.71 to 1,039.83.

The weakness in the airline stocks sent the Dow transportation average down about 12 percent.

Declines led advances by about a 6-to-1 margin on both major exchanges. Volume was robust, about 404 million shares on the New York Stock Exchange and 474 million shares on the Nasdaq.

Overseas, Asia's stock markets tumbled while Europe's stabilized. Treasury securities fell after rallying last week. The dollar declined against the euro and yen.

Selling as expected

It was an emotional start at the New York Stock Exchange, which observed two minutes of silence before trading began. Members of the New York fire and police departments, along with other emergency personnel, rang the opening bell blocks from the site of the still-smoking former World Trade Center.

Stock investors getting their first chance to react to Tuesday's attack were unnerved, betting the hit to business and consumer confidence will hurt the economy and profits.

The Federal Reserve's eight rate cuts this year took the overnight lending rate between backs to its lowest levels since early 1994. But as they have this year, cheaper borrowing costs have yet to help a market suffering their the worst period for profits in a decade.

Even without Tuesday's attack, investors have reason for wariness. Consumer sentiment tumbled last week as jobless claims surged. Industrial production fell for an 11th straight month in August, a month when the unemployment rate jumped to a four-year high.

Encouraged by the Securities and Exchange Commission, Intel (INTC: down $1.31 to $24.76, Research, Estimates), Starbucks and Sanmina (SANM: down $0.78 to $13.79, Research, Estimates) joined a growing list of companies to say they will buy back their own shares.

The morning losses, if they hold, could send the major indexes below their worst levels of the year. The Dow Jones industrial average began the day less than 300 points above 2001's nadir, while the Nasdaq stood less than 60 points above its low.

The search and rescue efforts continued blocks from the New York Stock Exchange, which has closed last week for the longest stretch since the Great Depression.

Monday's reopen was as much about symbolism, a sign that the attack has not succeeded in cowing Wall Street.

To that end, investors talked about buying stocks as an act of patriotism."They (the terrorists) have lost," said Richard Grasso, chairman of the New York Stock Exchange, before the market opened.

Warren Buffett, whose Berkshire Hathaway owns the reinsurer General Re, told CBS'"60 Minutes" that he would not sell any of his stocks when the market reopens.

But that didn't stop analysts from lowering their earnings targets. Bank of America and J.P. Morgan both cut their S&P 500 profit outlooks Monday.

Quelle: http://www.cnnfn.com[/b]

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