Wall Street trying to find footing

By Lisa Singhania

Associated Press

NEW YORK – Still recuperating from one of Wall Street’s worst showings ever, investors are preparing for another week of uncertain stock trading.

With the economic fallout from the terrorist attacks still being assessed and the prospect of military action, many investors and analysts expect more bumpy sessions.

Even news of a $15 billion government aid package for airlines wasn’t guaranteed to improve sentiment in a market troubled even before the attacks.

“We’re just in for some rough economic times over the short-term,” said John Broussard, an assistant professor of finance at Rutgers University’s School of Business. “This is a time when the basic economic fundamentals did not look good to start with, and these attacks did not help. Investors are just nervous.”

Uncertainty last week translated into double-digit percentage declines on the major market indexes. It was the biggest point loss and the fifth worst week ever for the Dow Jones industrials, which dropped 1,369 points over five sessions.

Before the Sept. 11 attacks, such strong selling might have signaled that a market turnaround was imminent. Investors, finally convinced that the market had done all the selling it was going to do, might have swooped in to buy stocks at the lowest prices seen in three years.

But that has yet to happen. With troops mobilizing, military equipment headed to the Persian Gulf and President Bush talking about a war on terrorism, the economic climate has changed.

Although companies were reducing staff before, many of the newest layoffs are being blamed on the attacks. In the past two weeks, airlines and other businesses have announced more than 100,000 job cuts and reduced profit forecasts, citing business losses caused by the tragedies and uncertainty.

Worries about a pullback in consumer spending, which accounts for two-thirds of the economy, have intensified. Analysts fear that the prospects of military action, a recession and the general malaise that has fallen over the nation will keep consumers away from malls, car dealers and other places they spend. Retailers also watched their stock prices tumble because of investors’ worries.

Markets were volatile overseas as other countries tried to predict the direction of the U.S. economy.

Longer-term, the prognosis is better. The markets and the United States have recovered from tough times before, said Charles Calomiris, a banking historian at Columbia Business School.

He bought stock last week because he expects the economy to improve in the next few years.

“I can’t foresee what the path to recovery is going to be because along the way there are going to be shocks and upsets,” he said. “But I’m confident we’re going to get there.”

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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