Major U.S. stock markets to remain closed

Reopening planned by Monday

government bonds being traded

Terrorism Strikes America

Business Impact

September 13, 2001|By Julie Bell | Julie Bell,SUN STAFF

Trading in government bonds will resume today, but major U.S. stock markets will remain closed, giving trading firms at least one more day to deal with the tragedy that struck the World Trade Center before opening for business no later than Monday, Richard Grasso, chairman of the New York Stock Exchange, said yesterday.

Executives of the NYSE, the Nasdaq stock market and the Securities and Exchange Commission announced the decision late yesterday after meeting to discuss issues surrounding the resumption of trading, including the soundness of Wall Street structures near the site of Tuesday's terrorist attacks and firms' operational readiness.

"Our first and primary concern is restoring the public's confidence that this ... American dream is up and functioning," Grasso said in making the announcement during a news conference televised on CNBC. "There are still people trapped in the wreckage. We have to be careful that nothing we do interrupts the efforts of the brave men and women" continuing to look for victims and remove bodies at the site.

Jonathan Murray, a first vice president at Legg Mason Wood Walker Inc., said the decision struck the proper balance between sending a message that markets are sound and the concern that the tragedy would leave an emotionally devastated Wall Street without enough employees at work to handle the trades. The World Trade Center was home to a number of top investment companies, including Morgan Stanley Dean Witter & Co.

`Efficient pricing' sought

"You want to make sure there's enough volume, enough employees to ensure efficient pricing," Murray said.

Scott Horsburgh, chief investment officer for the money management company Seger-Elvekrog Inc. in Bloomfield Hills, Mich., said in an interview before Grasso's announcement that he thought a resumption of trading today would have been premature.

Many traders are likely to have barely escaped or to have lost friends in the destruction of the World Trade Center towers by hijacked planes, which might leave them emotionally unready to handle financial decisions that could have a broad impact on the economy.

"Do you want markets operating when people are not focused?" Horsburgh said. "How would you feel if you were in a building like that and you just escaped with your life?"

Once markets open, stocks are likely to trade lower as uneasy investors sell, analysts said. Mutual funds might sell early in the day to accumulate cash so that they can pay customers who want to get out of stocks.

Airline stocks could be hit hard over concerns that hijack-wary travelers will avoid flying. Property-casualty claims and workers' compensation insurance claims are likely to be high in the wake of the attacks, and that could hurt insurance company stocks.

In addition, analysts said, many large companies with business-interruption insurance are likely to file claims to recover losses incurred when business was put on hold because of the crisis. FedEx Corp., for example, has been affected because its planes were grounded by the national ban on air travel.

No long downturn expected

Analysts don't expect a major or prolonged downturn. A Legg Mason review of 26 national crises - from the Japanese attack on Pearl Harbor in 1941 to the Soviets' launch of the Sputnik satellite in 1957 to the resignation of President Richard M. Nixon in 1974 - found that on average, the Dow Jones industrial average fell 8.1 percent on the first day of trading after a crisis. Within 63 trading days after a crisis, it found, the Dow was up an average of 6.9 percent. And within 126 trading days, the Dow rallied to an average gain of 12.9 percent.

"The great lesson of the past is that stocks recover from assassinations, wars and other calamities," Murray said, "and there's no reason to believe that they won't this time."

World financial markets provided some solace yesterday. Most European markets rebounded slightly after a sell-off sparked by concern over the attack on the United States. Asian markets remained depressed.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.