By Amy Baldwin
Associated Press
NEW YORK – Stocks fell sharply Thursday – the third steep decline in four sessions – on fears of severe economic repercussions following last week’s terrorist attacks.
By late afternoon the Dow was down nearly 290 points, and was positioning itself to close near its low for the day, a loss of 338 points. So far this week, the blue chips have lost more than 1,100 points, or 12 percent. The index dipped below 8,500 for the first time in nearly three years.
Wall Street’s losses widened as Federal Reserve Chairman Alan Greenspan acknowledged that the attacks produced a significant drop in economic activity.
But the Fed chairman also said, “I am confident that we will recover and prosper as we have in the past.”
The selling was expected after a turbulent session Wednesday, when the Dow Jones industrial average fell more than 400 points but recovered to a loss of 144. But the market’s anxiety increased Thursday as Greenspan told Congress the attacks had disrupted the business activity in a number of ways, including a drop in consumer spending and travel and the stock market’s four-day shutdown last week.
But the Fed chairman also said, “I am confident that we will recover and prosper as we have in the past.”
In late afternoon trading Thursday, the Dow was down 287.64, or 3.3 percent, at 8,471.49. The blue chips are on track toward their biggest one-week point drop, eclipsing the 821.21 they fell in the week ending March 16.
The broader market was also down, with the Nasdaq composite index falling 40.65, or 2.7 percent, to 1,487.15 and the Standard &Poor’s 500 index off 22.27, or 2.2 percent, at 993.83.
The market will remain vulnerable as companies announce layoffs and profit warnings linked to the Sept. 11 attacks in which hijacked jetliners leveled the World Trade Center and destroyed part of the Pentagon.
Signs of economic fallout have already surfaced as all U.S. airlines have reduced their flight schedules and some have 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 that they will suffer as consumers and investors spend, borrow and invest less money. 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 an array of sectors.
Boeing, which has announced it will cut as many as 30,000 jobs, fell $2.03 to $30.58. Implementing the first of its 12,000 layoffs Thursday, Continental Airlines dropped $3.74 to $13.72.
Insurer American International Group, which said last week it expects its pretax losses from the attack to total $500 million, fell 68 cents to $68.82. Banker Citigroup declined $1.58 to $36.87, while brokerage house Merrill Lynch tumbled $1.34 to $37.16.
Retailer Target was down 87 cents at $27.39, while cruise ship operator Carnival was off $1.24 at $18.01.
The market will remain vulnerable to layoff announcements, earnings warnings and economic data as well as any political news.
“There’s a lot of uncertainty right now and that’s why the market is weak,” said Jim Weiss, chief investment officer for equities at State Street Research. “We just don’t know a whole lot about many things right now, and it may stay that way for a while.”
Analysts said some technical factors are also at work. 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 stock index futures, stock index options and stock options Friday, a quarterly occurrence called triple witching, which can prompt heavy selling.
Overseas markets also fell Thursday. Japan’s Nikkei stock average closed with a loss of 1.6 percent. France’s CAC-40 ended down 3.9 percent, and Britain’s FT-SE 100 fell 3.5 percent. In afternoon trading, Germany’s DAX index was down 5.3 percent.
Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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