Stocks drop sharply for third time in four sessions

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.

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.

In the first hour of trading Thursday, the Dow was down 239.68 at 8,519.45. With Thursday’s early decline, the Dow has lost 1,076 points so far this week.

Broader market measures were also down, with the Nasdaq composite index falling 40.92 to 1,486.88 and the Standard &Poor’s 500 index off 22.30 at 993.80.

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 $1.10 to $31.51 in early trading.

Insurer American International Group declined 74 cents to $68.76. Banker Cititgroup fell 65 cents to $37.80, while brokerage house Merrill Lynch slipped 70 cents to $37.80.

Retailer Target was down 84 cents at $27.42, while cruise ship company Carnival was off 65 cents at $18.60.

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.”

Overseas markets also fell Thursday. Japan’s Nikkei stock average closed with a loss of 1.6 percent. In afternoon trading in Europe, Germany’s DAX index was down 2.7 percent, Britain’s FT-SE 100 fell 3.0 percent, and France’s CAC-40 dropped 2.4 percent.