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The Honolulu Advertiser
Posted on: Tuesday, September 18, 2001

Dow drops 7.1% but avoids any sign of panic selling

• Calm prevails despite selloff
• Hawai'i travel, biotech firms hit hard

Gannett News Service

Traders hold a sign asking for prayer during a two-minute moment of silence on the floor of the New York Stock Exchange yesterday.

Bloomberg News Service

WASHINGTON — Stock trading resumed on Wall Street yesterday with sharp, steady losses that sent major indices to their lowest levels since 1998 in record trading volume.

But federal regulators and stock exchange officials said they were pleased that trading was orderly, with no signs of panic selling just six days after terrorists attacked the World Trade Center and the Pentagon.

U.S. markets had been closed for the longest period since a six-day "bank holiday" during the Great Depression in 1933.

The shaken airline and hospitality industries led yesterday's daylong plunge, with US Airways plummeting 52 percent, Continental by 49 percent, United Airlines by 41 percent and American Airlines by 39 percent.

The Dow Jones Industrial Index dropped by more than 700 points by mid-afternoon and closed with a record one-day point loss of 684 points. Still, the 7.1 percent decline was less than one-third the 22.6 percent slide of Oct. 19, 1987.

The losses were broad. The Dow average fell to its lowest point since December 1998. The Nasdaq index dropped 116 points, or 6.8 percent, to its lowest level in nearly three years and the S&P 500 fell 54 points, down 4.9 percent.

Despite the setback, federal regulators and financial experts emphasized that trading remained orderly and provided evidence of the market's resilience.

"The capital markets passed their first test today and we couldn't be prouder of what they did," Nasdaq Chief Executive Hardwick Simmons said moments after trading ended for the day. "It's not going to be the last test. It was just the first test. But everybody who had an opinion to register in the financial markets of the United States — whether they were here in this country or abroad — had a chance to register their opinion today."

Simmons predicted it could take two or three weeks to "get a sense of how people are judging the impact" of the terrorist attack on the U.S. economy.

Trading on the New York Stock Exchange opened at 9:33 a.m. after an emotional moment of silence and a rendition of "God Bless America."

Despite pleas by many brokers and federal officials for investors to not succumb to an emotional burst of selling, the market icily devalued those industries most hurt by the terrorist attack.

The steep drop in some stocks was softened by automatic circuit breakers that were put in place after the 1987 stock market dive, by large purchases from major institutional investors, and companies that bought back their own stock.

New York State Comptroller Carl McCall announced he would invest $1 billion in state public employee pension funds in stocks in coming weeks as part of a coordinated effort to buoy the market.

And well-known companies such as AIG, Cisco, Compaq, H&R Block, Intel, Pepsico and Starbucks also said they would buy back their own stock.

Henry Paulson, chairman and chief executive of the investment banking firm Goldman Sachs, said his firm estimated stocks were undervalued by 15 percent to 20 percent before the attack and still predicts a V-shaped economic recovery in the coming months.

Sheldon Jacobs, editor of the No Load Fund Investor newsletter in Ardsley, N.Y., said the overall stock market had been headed downward because of the squeeze on corporate profits even before last week's disaster.

The largest pension fund manager in the United States, TIAA-CREF, did not report any unusual behavior from customers.

"We haven't seen any mass redemptions or anything like that," said spokesman Jim Tolve.