N E W Y O R K, Sept. 17, 2001 -- It was a bitter return for U.S. financial markets today, with the bellwether Dow industrials badly battered, suffering their worst one-day point decline ever.
Today was the first trading day six days after terrorist attacks left Wall Street and the nation badly shaken. The resulting closure was the longest on the New York Stock Exchange since the 1930s.
The high point may have been the opening bell, subsequent two minutes of silence and a singing of "God Bless America." Immediately after the last note faded, traders pushed blue chips down dramatically and the blue chip index never recovered.
Even an emergency half-point interest rate cut was brushed off by traders.
The Dow Jones industrial average closed down around 684.81 points at 8,920.70 — the biggest one-day point loss ever, beating the previous record one-day drop of 617 points, set last April. Percentage-wise, the 7.12 percent drop seemed less painful, failing to break into the top 10 biggest percentage declines. Volume hit a record 2.4 billion shares.
The biggest losers on the day: airlines, major insurers face tens of billions of dollars in claims after last week's attacks, as well as financial services, travel and hotels, and retail stocks. The biggest winners: defense and security stocks.
The broader Standard & Poor's 500 Index lost 53.77 points, or 4.92 percent, to finish at 1,038.77 and the technology-laced Nasdaq Composite Index sank 115.82points, or 6.83 percent, to 1,579.55. Both indexes were thelowest since mid-October 1998.
Midway through the day, as the market tumbled, President Bush publicly expressed his "great faith" in the U.S. economy, which he said is still poised for growth despite last week's attacks.
"I understand it's tough right now. Transportation, business is hurting, obviously the market was correcting prior to this crisis. But the underpinnings for economic growth are there," Bush told reporters at the Pentagon.
Shaky Start Expected
Trading was hardly expected to be business as usual. Many experts were predicting that already shaky financial markets would lose further ground as the damage inflicted on the psyche of the American people filters its way into the economy and the stock market, further undermining the confidence of consumers and investors.
And without doubt, the horrific images the world has seen over and over again will weigh on the minds of those that help move $90 billion worth of shares a day.
Indeed, brief market downturns often follow catastrophic events. In the wake of the attack on Pearl Harbor, the Dow Jones Industrial Average dropped 6.5 percent, while the average plummeted 17.9 percent after the Arab oil embargo in 1973.
"There is obviously a movement downward and probably will continue for a while," says Robert Hormatz, vice chairman of Goldman Sachs. "But after a point, people are going to see buying opportunities and will then start buying. What that occurs is awfully hard to predict."
Before the Unthinkable
All the same, a growing number of analysts and economists are anticipating a pickup in economic activity as New York and Washington rebuild from their terrible disasters, and defense activity helps stimulate growth. Some were even suggesting that with the reopening today a spate of patriotic buying might rally markets, though most are predicting more volatility than anything else.
"The near-term shock of the tragedy will inevitably dampen activity and confidence," said Sherry Cooper, global economic strategist with the Bank of Montreal Group. "However, I fully believe that the resilience of the American economy will show through quickly."
Added Don Marron of banking giant UBS: "The fundamentals of the economy are unchanged. The consumer is very resilient. We have to not let these criminals slow this economy down."
Before the unthinkable happened, analysts, economists and market watchers had been intensely focused on the troubled U.S. economy and what could turn it around. Tax cuts, interest-rate cuts and other issues were at the top of the agenda for lawmakers in Washington, and a primary focus of the Federal Reserve.
Now, with lower Manhattan resembling a bombed-out war zone and consumers scarred deeply, many on Wall Street expect the U.S. economy will experience at least six months or more of negative growth this year, the textbook definition of recession.
"The chances of a real recession are many times higher than they were before," said Roger Kubarych, chief U.S. economist for HVP Group in New York.