U.S. stock markets to open Monday

but closures hurt brokerage firms, experts say

Despite loss, analysts predict little volatility, downturn to be made up

Terrorism Strikes America

Business Impact

September 14, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Trading on U.S. stock markets is scheduled to resume Monday, but analysts said the four--day closure has taken a toll on brokerage firms that can never be erased.

"There's a clear loss to the economy - trading volume generates income, profits and sales commissions" to brokers, said Lacy H. Hunt, chief economist for Hoisington Investment Management Co. in Austin, Texas. "If there's no trading on a given day, it's almost like when no one is flying in an airplane seat or renting a hotel room - it's unlikely to be made up in the future."

The markets never opened Tuesday, after the terrorist attack that destroyed the World Trade Center, leaving thousands missing and paralyzing New York's financial district.

A breakdown of telephone, electric and other services has been one of the obstacles to a resumption of trading. The local telephone provider, Verizon, said one of its five switching centers near the disaster site was out of service. About 200,000 lines and 3 million data circuits, or private lines that serve business customers, are housed in the building.

The markets are scheduled to open at their regular 9:30 a.m. start time, pending results of a dry run scheduled for tomorrow.

The market's closure is not likely to have much of an impact on the companies whose shares are traded, unless they had planned to do a secondary offering, said Gary Robbins, a former economist for the Treasury Department who is now president of the consulting firm Fiscal Associates in Arlington, Va.

The loss is "on the shareholder side more than on the business side," he said.

If an investor has a need for liquidity - to make, for example, an estimated-tax payment - and was planning to sell shares to come up with the funds, he or she will likely have to take out a loan to cover the expense, Robbins said.

Those investors, aside from having to pay interest on the short-term loans, will likely get into the markets early on Monday morning to sell shares, he said.

"My guess is it will cause a little volatility in the markets," Robbins said. "I think later in the day the initial downturn will be made up as people get into the market and start buying."

Hunt said it was too soon to guess what the markets might do on Monday.

"There is a negative, adverse shock," he said. "But at the same time, there is a mood of patriotism in the country and perhaps people will refrain from selling because of that."

Mark Vitner, managing director of First Union Securities, said his company is advising investors to "sit tight." He noted that studies show that in past times of crisis - the Vietnam War, the Cuban missile crisis, the Persian Gulf war - "investors who panicked [and sold stock] wound up getting burnt."

He agreed that the income lost during the four-day closure could never be made up, but "when you view it in the space of an entire year, the revenue loss is not that significant."

"It's not the end of the world," he said, referring to the lost income. "In some respects [the markets' closure] was helpful in that we are not as likely to see the market tank as we would have been if they had stayed open, because there would have been even more uncertainty."

Vitner said if markets in the United States fall as much as the European markets did, the Dow Jones industrial average would drop to about 9,200 points.

"It would be a bad day, but we've dealt with plenty of those over time," he said.

The markets in Europe and Asia were mostly up yesterday, although trading volumes were fairly low.

The FTSE 100 index of leading British shares closed up 1.26 percent at 4,943.6, while Germany's Xetra DAX rose 1.32 percent to 4,392.40. In France, the CAC-40 index slipped 0.01 percent to 4,113.87.

Asian markets ended mostly higher yesterday, with advances in South Korea, Japan, Hong Kong and several other cities.

The U.S. dollar slipped in European dealings. The euro was quoted at 90.75 cents late yesterday, up from 90.70 late Wednesday, while the dollar fetched 119.20 yen, down from 119.37 yen.

The Associated Press contributed to this article.

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