NEW YORK >> Economic fallout from last week's terrorist attacks sent stocks spiraling for the second time in three days today. Only a late burst of buying saved the Dow Jones industrials from their worst three- day point loss ever.
then rally at close
The Dow, down 423, ends
off just 144 after the Pentagon
orders planes to Persian Gulf
By Lisa Singhania
The Dow, down 423 points in midafternoon, recovered to a loss of 144 following news reports that the Pentagon had ordered fighter and bombers to begin moving to the Persian Gulf area, the first concrete sign of preparations to retaliate for last week's terrorist attacks.
"I think that's what the market needed to see, they wanted to get rid of uncertainty and this helped," said Charles White, portfolio manager at Avatar Associates.
Despite the comeback, the market remained vulnerable after thousands of job cuts at Boeing and other companies following the attacks heightened fears about the already fragile economy.
"The selling pressure is very broad-based -- cyclical and defensive stocks, value and growth stocks are all down basically the same amount," said Tom Galvin, chief investment officer at Credit Suisse First Boston. "If you go back to the 1990 Kuwait invasion, the market fell 15 percent in the first three months and its seems like we want to make that happen faster."
At its low, the Dow had accumulated a three-day loss of more than 1,100 points. Its worst three-day loss was 984 points in August 1998.
The Dow closed down 144.27, or 1.6 percent, at 8,759.13. So far this week, the Dow is down 746.81, or 8.8 percent.
Broader indexes also fell. The Nasdaq composite index was down 27.28 at 1,527.80, a 1.8 percent loss, while the Standard & Poor's 500 index was off 16.64, or 1.6 percent, at 1,016.10.
Declining issues led advancers by more than 3 to 1 on the New York Stock Exchange, with 2,444 down, 749 up and 144 unchanged. Volume came to 2.11 billion shares vs. 1.67 billion yesterday.
The NYSE composite index fell 8.99 to 529.38, the American Stock Exchange composite index tumbled 16.46 to 821.06 and the Russell 2000 index fell 8.46 to 403.20.
U.S. Treasury notes gained as stocks fell, heightening expectations the Federal Reserve will slash its benchmark overnight interest rate a half-percentage point on Oct. 2 in a bid to stave off recession.
Two-year notes, among the securities most sensitive to overnight lending rates set by the Fed, gained 14, or $2.50 per $1,000 face amount, to 101 1732. Yields fell 13 basis points to 2.81 percent, down 70 basis points since Sept. 7 and the lowest since 1958 when Treasuries maturing in two years yielded 2.37 percent. The 10-year note rose 332 to 102 1332; its yield fell 1 basis point to 4.69 percent.
While notes surged, bonds fell. Thirty-year bonds lost 18 to 971532, boosting yields 1 basis points to 5.55 percent, as investors speculated increased government spending needed to rebuild lower Manhattan and strengthen the military will force officials to scuttle plans to buy back longer-dated bonds.
Today's trading showed how unpredictable the market is likely to be in the coming days. It had appeared to steady yesterday after the severe drop Monday, when the Dow fell a record 684 points.
Boeing's announcement late yesterday of as many as 30,000 job cuts, as well as predictions of tough times ahead by Eastman Kodak and others, renewed the fears of investors already skittish about the market. Boeing fell 53 cents, or 1.6 percent, to $32.61.
Wall Street had been pushing the market lower all year on worries about when business will improve and, prior to last week's attack, many analysts had predicted that the worst of the selling might be over soon. But the assaults on the World Trade Center and Pentagon negated those forecasts and raised the possibility the situation may be deteriorating.
"It's very murky as to what our reaction is going to be politically and meanwhile you're continuing to get major layoff announcements," said Bill Barker, investment consultant at Dain Rauscher. "The economic uncertainty has heightened considerably over the near-term and there is simply no reason to buy."
Eastman Kodak slid $2.22, nearly 5.6 percent, to $37.61 after it lowered third-quarter expectations and said more job cuts are inevitable. The world's largest photography company had announced in April it was cutting 3,500 jobs from a global payroll of 78,400.
"It's hard to look at headlines of 30,000 layoffs and more and not worry about what the impact is going to be on an economy that is already slowing," said Charles White, portfolio manager at Avatar Associates. "From a sentiment standpoint, we're starting to get to levels of despair among investors. It's easy to just sit and your desk and be miserable and morose on news like this."
Tech stocks also took a hit, particularly in the semiconductor category. Intel fell $1.19 to $22.28, a 5 percent drop.
"I think market overall is bracing for higher unemployment," said Robert Streed, portfolio manager of Northern Select Equity Fund, who expects the markets to flounder for about a week before making any real progress.
Among the few winners today: telecommunications firm Verizon, which rose $2.20 to $53.90.
Also today, the market contended with another sign of economic fragility. The Commerce Department reported that the U.S. trade deficit narrowed slightly to $28.8 billion in July as a big drop in imports of cars, oil and other foreign products offset the biggest fall in U.S. exports on record. The decline was a reflection of widespread weakness domestically and overseas.
Analysts also attributed the losses to technical aspects of trading. They said investors who borrowed money to buy stocks earlier might have been forced to sell some of their portfolio to pay back those loans in what are known as margin calls. Another factor is the expiration of stock futures and options Friday, a quarterly occurrence called triple witching, might be contributing to the downturn. Finally, Rosh Hashana, the Jewish New Year, was celebrated yesterday and some analysts said trading might have been lighter and quieter that session as a result.
Galvin also noted that yesterday's respite squares with the market's history of stop-and-start trading in times of extreme uncertainty.
"I continue to talk to more fund managers that are creating buy lists than sell lists," he said.
Overseas, stocks were mixed. Japan's Nikkei stock average rose 2.7 percent. In Europe, Germany's DAX index lost 3.7 percent, Britain's FT-SE 100 dropped 2.6 percent, and France's CAC-40 was off 2.0 percent.