Wall Street stabilizes in Tuesday morning trading

Stock market's attempt to stage mini-rally fizzles Tuesday

September 18, 2001

By Amy Baldwin
AP Business Writer

NEW YORK – Wall Street found some stability Tuesday when investors curtailed their selling and even did some buying, but ran into late resistance in its attempt to rebound from Monday’s shock wave that sent blue-chip stocks tumbling to their largest one-day point drop.

Mired in political uncertainty following last week’s terrorist attacks, the market gave up earlier gains that had pulled the Dow industrials back above the 9,000 level.

"Uncertainty is a primary enemy for the market, and the events of the last week have created a high level of uncertainty. The market was in a downturn before, and this only exacerbates that," said Ricky Harrington, technical analyst for Wachovia Securities.

The Dow Jones industrial average closed down 17.30 at 8,903.40.

However, the slump in the Dow paled in comparison with the decline Monday – the first day of trading since hijacked jetliners smashed into the World Trade Center and the Pentagon – when the blue chips lost a record 684.81 points and fell below 9,000 for the first time since December 1998.

The broader market also retreated from an earlier advance Tuesday. The Nasdaq composite index fell 24.47 to 1,555.08 and the Standard & Poor’s 500 index declined 6.03 to 1,032.74.

Major indexes aside, a sign of the market’s attempt to stabilize was apparent in New York Stock Exchange trading volume, which returned to a more moderate level of 1.65 billion after a record-breaking session Monday when 2.33 billion shares were traded.

Still, analysts expect the market to be weak and vulnerable throughout this week as skittish investors rush to adjust their portfolios. Investors now have more to be nervous about – namely national security – than the weak economy, which had been pulling stocks lower for weeks.

"What is holding it down are the new questions of political uncertainties," said Joseph V. Battipaglia, chief investment strategist at Gruntal & Co.

Battipaglia expects the market to move in a range of 5 percent in either direction until it becomes clearer what form the war on terrorism pledged by President Bush will take.

Over the longer term, however, analysts say stock prices will recover and the market will head higher again. In fact, they say massive selling like Monday’s might be what is needed to finally form the market bottom that investors have been anxiously awaiting for the last year and a half.

"Weak now, stronger later. There is no question there," said Jon Brorson, director of Northern Trust in Chicago. "The question is how much weakness do we get and when does the turn (upward) come."

Tuesday’s losers included sectors such as travel services and insurance that were weak Monday. Online travel agent Expedia dropped $4.36 to $19.64.

Insurers again traded lower as the industry faces big losses following last week’s attacks. American International Group fell 95 cents to $70.05.

Financial companies suffered as Wall Street expects that investors and consumers will invest, spend and borrow less amid greater uncertainty about the economy. Dow industrial stock American Express, which issued a third-quarter profit warning late Monday, skidded $2.87 to $27.38.

Winners included airlines, which endured double-digit dollar losses Monday. AMR, the parent of American Airlines, gained $2 to $20, and UAL, the parent of United Airlines, rose $1.49 to $18.99.

Transportation Secretary Norman Y. Mineta said the Bush administration was preparing an aid package, noting that the attacks are costing airlines $250 million to $300 million a day. Since the attacks, all major U.S. airlines have announced reduced flight schedules, anticipating that a fear of flying will curb demand.

Other winners included technology companies, which analysts said could benefit as businesses, particularly in the financial sector, spend more money to revamp offices in the wake of the attacks. IBM rose $3.06 to $94.86, while Microsoft advanced $1.41 to $54.32. Both are Dow industrials.

Retailing issues also moved higher after selling off Monday amid concerns that consumers would further curb spending. Wal-Mart rose $1.35 to $45.35.