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Investors' fears fuel 7 percent decline
© St. Petersburg Times, Stocks plunged Monday as frightened investors took advantage of their first chance to sell since terrorist attacks closed the U.S. financial markets last week. Many individual investors held fast, companies stepped up with pledges to buy back their shares and the Federal Reserve slashed short-term interest rates another half percentage point. But it wasn't enough. Even a vote of confidence from legendary investor Warren Buffet couldn't stop stocks from dropping to their lowest levels in three years. The Dow Jones Industrial Average fell a record 684.81 points to close at 8,920.70, down 7.13 percent. The broader Standard & Poor's 500 Index held up better, as a 53.77 point decline took it down 4.92 percent to 1,038.77. The battered Nasdaq Composite Index fell 6.83 percent, down 115.82 points to 1,579.55. "I'm just very relieved that it wasn't worse," said Tampa money manager Dee Howland of Howland and Associates. "But I don't think it's over." The four-day closing was the longest for the nation's stock market since the Great Depression. The New York Stock Exchange is just a few blocks from the World Trade Center site, and the attack wreaked havoc on communications systems, which were restored over the weekend. In addition, offices of many major brokerage firms were destroyed or seriously damaged. Howland and other financial advisers say their clients were overwhelmingly calm in the face of the market's long shutdown and Monday's selloff. "There have been almost no people calling to sell," said John Mathews, manager of the Tampa office of the brokerage firm UBS Paine Webber. "We've had a lot of people saying "How can I buy? When should I buy?' Our advice is "Let's sit back and see what happens.' You don't want to make emotional decisions when you're buying or selling." St. Petersburg money manager Kurt Ulrich said about a half dozen of MW Pritchard Hubble & Herr's more than 600 clients wanted to sell everything today but the firm talked them out of it. "I don't know who's selling, but I don't know anybody buying either," Ulrich said. He said he still sees lots of stocks he likes -- in industries such as health care and trucking -- but "we're all taking a wait-and-see attitude." However, lots of professional investors -- money managers and insurance companies -- were in the market Monday, dumping stocks and looking for bargains. The New York Stock Exchange reported record trading volume even though restrictions on computerized trading were in effect most of the day. As expected, investors were particularly eager to bail out of stocks that are expected to suffer the most from last Tuesday's attacks on the Pentagon and the World Trade Center. Leading that list are the airlines, which are expected to lose billions of dollars from the grounding of air travel last week, increased security requirements and an uncertain future as fear of terrorism and a weak economy dampen enthusiasm for flying. Many airline stocks lost more than 40 percent of their value Monday, including America West Holdings Corp., US Airways Group, Continental Airlines, Delta Air Lines and UAL Corp. The rest of the travel and leisure services industry got hit hard too as a cutback in flying and a slower economy are expected to slash spending on hotels, cruise lines and entertainment. Walt Disney Co. stock fell nearly 20 percent even though the owner of Orlando-based Walt Disney World sold $1-billion in bonds Monday partly to finance a stock buyback. Other companies from General Electric and Pepsi to Intel Corp. and Cisco Systems also say they plan to buy billions of dollars of their own shares, but Pepsi was among the few in the group to close up for the day. Food and beverage stocks are considered defensive holdings for tough economic times. Insurance companies got hit Monday as they are expected to foot much of the bill for the biggest man-made disaster in history. There were some winners: defense contractors, security companies, gold mining companies, drug stocks and other health care companies. But many buyers felt no urgency about jumping into the market turmoil. "There are a lot of buyers sitting on the sidelines, and there is no advantage to them to step in too early," said Thomas James, chairman of Raymond James & Associates, who was on the firm's trading floor for the market opening. Raymond James chief economist Scott Brown said investors might take comfort in the fact that U.S. markets fared performed better Monday than some foreign markets in the wake of the terrorist attacks. World markets were mixed Monday, with Asian stocks falling as European stocks rallied. The European markets took their cues from the Fed's half percentage point cut in interest rates and a parallel move by the European Central Bank. But in Tokyo, the Nikkei Stock Average is at its lowest point in nearly 18 years. Stocks also fell in Korea, Hong Kong and Singapore. Early today, prices bounced back in some Asian markets, with the Nikkei up 2.6 percent by midmorning. The Australian market was trading up 2.5 percent. Brown is one of many economists and investors concerned about the impact of last week's events on U.S. consumers, who have kept the economy afloat. "The concern is that people will be less confident about the future," he said. "If everyone decides to increase savings by 3 percent, GDP (gross domestic product) goes down by 2 percent. It wouldn't take a lot to tip this economy into a recession." Investment strategists at the major brokerage firms are now talking about economic recovery in 2002, having given up on this year. Most have lowered their projections for corporate earnings. Financial advisers say they continue to urge clients to take a long-term view. "Long-term investors should remind themselves that that's what they are," said Bill Sieffert, senior vice president for Northern Trust Bank of Florida in Tampa. "All you can really do in situations like this is look at history and see what happened in other crises, ranging from Pearl Harbor to the Kennedy assassination. The average market decline has been right around 5 or 6 percent, which is where we are today. "In percentage terms, it doesn't seem all that onerous, but in terms of the destruction of wealth, it's numbing," he said. - Information from the Associated Press was used in this report.
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From the Times Business report
From the AP
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