Stocks drop sharply, Dow loses more than 380

By Amy Baldwin

Associated Press

NEW YORK – Wall Street hastened its retreat from the economic damage of last week’s terrorist attacks, sending stocks tumbling Thursday in their third steep decline in four days.

The Dow Jones industrial average fell 382 points, bringing its loss so far this week to 1,229 points – nearly 13 percent – and putting the blue chip index in line for its biggest one-week point drop.

“It’s rollercoastering down,” said Matt Brown, head of equity management at Wilmington Trust.

The market’s anxiety surged Thursday as Federal Reserve Chairman Alan Greenspan told Congress the terrorist attacks have hurt the economy in a number of ways, including a drop in consumer spending and travel and last week’s four-day shutdown of the stock market.

While the Fed chairman also said, “I am confident that we will recover and prosper as we have in the past,” the Dow still fell sharply – down 382.92, or 4.4 percent, to 8,376.21.

And, unless the blue chips rally substantially Friday, they are likely to have their biggest one-week point drop, eclipsing the 821.21 they fell in the week ending March 16. As of now, the Dow’s percentage loss for the week is its ninth largest.

The Dow also closed below 8,400 for the first time since October 1998.

The broader market also skidded lower Thursday, with the Nasdaq composite index falling 56.87, or 3.7 percent, to 1,470.93 and the Standard &Poor’s 500 index off 31.56, or 3.1 percent, at 984.54.

This is the first time the S&P 500, considered the market’s best indicator, has closed below 1,000 since October 1998.

“The economy was in bad shape before this event, and this event just magnified everything by thousands,” said Gary Kaltbaum, market technician for Investors’ Edge Partners, of last week’s terrorist attacks.

Uncertainty weighed heavy on Wall Street, where analysts and investors wondered just how much and for how long the economy will suffer as a result of the Sept. 11 attacks, and anxiously awaited to see how the Bush administration will retaliate.

“We just don’t know the answers,” said Ricky Harrington, a technical analyst for Wachovia Securities.

That sentiment was echoed throughout the market. Jon Brorson, director of equities at Northern Trust, said: “We just don’t know, and that’s the thing.”

And, Kaltbaum said: “Nobody has a clue what tomorrow morning will bring. And, when there is so much uncertainty, people don’t want their money at risk.”

The intense selling was expected after a turbulent session Wednesday, when the Dow fell more than 400 points before recovering to a loss of 144. The market is expected to remain quite vulnerable as companies announce layoffs and profit warnings linked to the attacks in which hijacked airliners leveled the World Trade Center and destroyed part of the Pentagon.

Signs of economic fallout have already appeared as U.S. airlines reduced their flight schedules and cut thousands of jobs, and as insurance companies have warned that massive payouts will hamper the industry for quite a while.

Likewise, financial companies have warned they will suffer as consumers and investors spend, borrow and invest less. Retailers and those in the entertainment industry also expect a drop in business.

In keeping with investors’ fears that practically all businesses will be hurt, Thursday’s selling was again spread across market sectors.

Dow industrial Boeing, which has announced it will cut as many as 30,000 jobs, fell $2.85 to $29.76. Implementing the first of its 12,000 layoffs Thursday, Continental Airlines dropped $3.51 to $13.95.

Insurer American International Group, which said last week it expects its pretax losses from the attack to total $500 million, fell 60 cents to $68.90. Banker Citigroup, a Dow component, declined $2.09 to $36.36, while brokerage house Merrill Lynch tumbled $2.49 to $36.01.

Retailer Target fell $1.36 to $26.90, while cruise ship operator Carnival slipped $1.20 at $18.05.

Analysts said some technical factors are also at work in the market.

They said investors might be receiving margin calls – a demand that they repay money borrowed to buy stocks earlier. Another factor is the expiration of index futures and index and stock options Friday, a quarterly occurrence called triple witching, which can prompt heavy selling.

Declining issues outnumbered advancers more than 5 to 1 on the New York Stock Exchange. Volume was heavy with 1.91 billion shares being traded, down from the 2.15 billion shares traded Wednesday.

The Russell 2000 index, the barometer of smaller companies stocks, fell 15.55 to 387.65.

Overseas markets also ended Thursday lower, largely on uncertainty of how other countries might help the United States retaliate the terrorist attacks. Japan’s Nikkei stock average closed with a loss of 1.6 percent. France’s CAC-40 ended down 3.9 percent, Britain’s FT-SE 100 fell 3.5 percent, and Germany’s DAX index lost 5.7 percent.

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