Attacks in London fail to rattle U.S. markets

Key American indexes finish day on upswing

Contrast with post-9/11 reaction

July 08, 2005|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

United States stock markets reacted very differently to the London attacks yesterday than they had after Sept. 11, 2001, or the 2004 bombings in Spain, with all major indexes finishing in positive territory.

Even in Europe, investors saw an opportunity to buy. After falling sharply in the morning, London's FTSE 100 index gained back more than half its losses by the end of the day.

"The market really showed extraordinary resilience," said Andrew M. Brooks, head of equity trading at Baltimore-based T. Rowe Price Group Inc. "To close higher ... was really surprising."

European stocks felt more strongly the impact of the morning rush-hour explosions, which killed at least 37 and injured hundreds. The FTSE 100 index fell 1.36 percent, after being down nearly 4 percent at its low point. By the end of the day, Germany's DAX had dropped 1.85 percent, and the French CAC 40 had fallen 1.39 percent.

But in the United States, the Dow Jones industrial average rose 31.61 points - about a third of a percent - to close at 10,302.29, one day after escalating crude oil prices prompted a triple-digit drop. The Nasdaq composite index rose 7.01 to 2,075.66, and the Standard & Poor's 500 index added 2.93 to close at 1,197.87. Trading volume on the New York Stock Exchange was 1.58 billion shares.

Compare yesterday's reaction with Sept. 17, 2001, the first day of trading after the 9/11 attacks: The Dow Jones industrial average plummeted about 685 points, or 7 percent. It fell nearly 170 points March 11, 2004, the day of the bombings in Madrid, Spain, that killed 191 people.

"The markets are able to absorb this kind of shock now," said Sandy Lincoln, chief market strategist at Wayne Hummer Asset Management Co.

"I don't know if it's good or bad," added Carl Tannenbaum, chief economist for LaSalle Bank, "but we all seem to have adjusted to a world where terrorist attacks are not entirely unexpected."

Analysts said location helps explain why American markets appeared barely affected, but timing also played a role. The first of the blasts hit London shortly before 9 a.m. - almost 4 a.m. on the East Coast.

"This happened so early in the morning, New York time, that there was no sense of a knee-jerk reaction," said Jay Suskind, head trader at Ryan Beck & Co. Inc. "The market players said, `We know who al-Qaida is, we know what happened before, the economy is strong, things are OK, let's look at it as a buying opportunity.' ... It's remained calm. There's no panic in the States."

The Dow fell about 100 points immediately yesterday morning but just as quickly began heading back up. Brooks, of T. Rowe Price, figures that the American markets took their cue from London's later rally.

"The markets pretty quickly say, `OK, it is what it is, it's not as bad as Madrid, it's not as bad as 9/11, so let's get back to what earnings look like,'" Lincoln said.

The previous attacks have offered investors a road map for stock performance, said Giri Cherukuri, head trader at OakBrook Investments LLC: "They've had the experience of the market coming back relatively quickly," he said.

U.S. stocks might not have fared any better yesterday even if it had been a normal day, analysts said. Employment numbers are due this morning, and equity buyers tend to hold back shortly before in case there are any surprises.

Crude oil, which has weighed on stocks in recent days as prices spiraled upward, helped the market yesterday, dropping 55 cents to $60.73. Some analysts called the decline attack-related - if there's less tourism, there's less demand for fuel - but Lincoln said fear wasn't the driving factor.

Security-related companies benefited, including some locally. The stock of Annapolis-based CompuDyne Corp., which provides security products for government agencies and businesses, rose 43 cents to $7.73. Essex Corp. in Columbia, an intelligence and defense agency contractor, saw its stock rise 48 cents to $22.93.

Airline and hotel stocks fell on fears of decreased tourism. Marriott International Inc. stock dropped 24 cents to $68.59, and American Airlines parent AMR Corp. dropped 14 cents to $12.08. Southwest Airlines, which has a heavy presence in Baltimore, recovered from morning losses to finish up 18 cents at $13.77.

LOCALLY

Human Genome Sciences Inc.

Shares of the Rockville company gained 36 cents to $12.18 as investors sent biotechnology and biodefense stocks higher in response to the terror attacks in London.

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