The US markets made a valiant effort to regain their pre-September 11th equilibrium this week, with most major indices recovering all their losses in an astonishing rally on Thursday. But yesterday the rally fizzled as markets oscillated wildly amid reports of an anthrax scare in New York and a barrage of more negative economic news.
Wall Street was already jittery after the FBI said on Thursday it had information there could be more attacks in the next few days both at home and against US interests abroad.
"There's anxiety going into the weekend concerning possible terrorist acts. Traders are lightening up positions," said Mr Keith Gertsen, head of Nasdaq trading for Deutsche Bank Alex Brown as the Dow plunged in mid-afternoon before a last-half hour rally.
Ms Lara Rhame, economist at Brown Brothers Harriman in New York said: "The US economy is definitely heading to recession for a few quarters but we are going to pull out of it. The government has room to pump in a lot of fiscal stimulus."
Stocks were already on the way down over news that September retail sales slumped 2.4 per cent, well below forecasts for a drop of 0.8 per cent. Excluding car sales, September retail sales fell 1.6 per cent. They tumbled further on news that inflation was on the rise.
The producer price index rose 0.4 per cent in September, well above forecasts for an increase in inflation of only 0.1 per cent.
The other big shock to the markets was a warning from credit card issuer Providian Financial that earnings would fall much more than previously projected, because of higher credit losses last month. Providian tumbled $6.75 (€7.45), or 34 per cent, to $13.51. General Electric which owns NBC, also slipped.
The combination of an inflationary signal and slow retail sales should mean falling consumer confidence, but consumer confidence unexpectedly rose in the weeks following the September 11th attacks.
The University of Michigan's preliminary October consumer sentiment index rose to 83.4 in October where economists had expected a drop to 76.1.
There had been some satisfaction on Wall Street on Thursday when the Nasdaq Composite Index and the S&P 500 index closed slightly higher than their final levels on September 10th. The Nasdaq soared 75.21 points or 4.6 per cent to 1,701.47 while the S&P surged 16.44 points or 1.5 per cent to 1,097.43. The Dow remained some 200 points off its September 10th closing level.
Yesterday the Dow plunged by over 200 points, then recovered after extremely volatile late-afternoon trading. The blue-chip index still ended the day off 66.43 points, or 0.71 per cent, at 9,344.02.
The Nasdaq fared better reversing a 2.5 per cent mid-session retreat to end ahead marginally at 1,703.31.
Meanwhile, lay-offs mount in the aftermath of the attacks. Boeing said yesterday it would trim 12,000 jobs by December 14th, including layoffs of 8,000 full-time workers, as part of a previously announced plan to cut up to 30,000 workers by the end of 2002.
Computer Associates International, the world's fourth-largest software company, said yesterday that it would lay off 900 employees, or 5 per cent of its workforce, in the face of slowing corporate spending on technology.
Xerox said yesterday that it expected a greater third-quarter loss than predicted but was "cautiously" optimistic about fourth-quarter profitability.
The copier and printer giant said it would generate third-quarter revenues of $3.8 billion to $4 billion and a loss of 22 cents a share to 25 cents a share before restructuring charges of five cents a share. Wall Street analysts were expecting the company to post a third-quarter loss of 12 cents a share and revenues of $3.94 billion.
Xerox was well-positioned to meet third-quarter targets until the September 11th attacks, said Ms Anne Mulcahy, president and chief executive officer.
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