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Terror Attacks Still Impacting Wall Street - 2001-09-19


Day three of resumed trading on Wall Street brought more erosion in U.S. stock prices. The major averages closed lower again Wednesday, as evidence mounted of the economic costs of last week's terrorist attack.

The Dow Jones Industrial Average had plunged more than 400 points but came back to close 144 points lower, just over one and a half percent, at 8,759. The tech-weighted Nasdaq composite dropped another 1.75 percent. The broader Standard and Poor's 500 index fell 16 points, 1.5 percent.

A broad-based sell-off left almost no place for investors to hide. The only bright note was the telecom sector. But it was not enough to cheer those hoping the markets would stabilize after Monday's seven percent loss.

The markets may be getting back to fundamentals after the initial shock. But that means a closer look at corporate earnings and the U.S. economy going forward. Analysts say none of it looks too good right now.

Aerospace leader Boeing and photography giant Eastman Kodak, both Dow components, said their business will be hurt in the wake of the terrorist attack. Boeing plans to lay off 30,000 workers.

Analyst Thomas Galvin from the Credit Suisse First Boston investment firm says the markets may look shaky for a while. But he believes there will not be a total meltdown.

"It does take some time for the market to come to grips with lower earnings estimates, reduced consumer sentiment," he says. "We won't get a reading on that for another two weeks, actually September 28, and then I think we'll see better buying activity going out there. But I think stocks were, in the aggregate, cheap prior to this event. They've clearly become cheaper. Expectations on earnings have come down. But interest rates have come down more than ample to make people interested in stocks again."

The big concern slamming technology shares is capital spending. Steve Milunovich, an analyst with Merrill Lynch, says businesses are likely to be more prudent in buying new equipment. Projections for a recovery in technology in the first half of next year, he says, are probably too optimistic now.

"I think it's premature to say what impact the terrorist attack will have. But I think the net effect is we could see this delayed into the second half of next year," he says. " Obviously in the short term, there will be some incremental spending in wireless products, perhaps communications equipment, obviously security software. But I think most corporations are just going to hunker down now [sit tight] and not spend on anything that's not absolutely necessary."

The markets hate uncertainty. Unfortunately, they have an abundant supply of it at this point.

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