The blue chip Dow Jones industrial average logged its biggest one-day point loss yesterday as investors in the US and around the world rushed to sell shares in companies worst hit by the attack last week on the World Trade Centre in Manhattan.
A surprise US Federal Reserve rate cut of 0.5 of a percentage point before the opening bell did not stop the precipitous slide on the first day of trading since hijacked planes smashed into the twin towers of the Trade Centre on September 11th.
The massive sell-off in heavy trading was prompted by fears the attack could spark a global recession, and would have been much worse but for a campaign to buy back shares by several leading companies.
An anticipated patriotic rally failed to materialise, as apprehension rose over possible US military action and a further lurch to recession in an economy already weakening before last Tuesday's devastating blow to the financial district.
The Dow Jones industrial average plunged 678.52 points to 8,921.18 - down 7.07 per cent; and the technology-laden Nasdaq was down 116.09 to 1,579.28 - down 6.85 per cent.
The Dow has now fallen more than 20 per cent from its all-time high in mid-January 2000, placing the index of 30 leading American companies in bear territory. The Dow, Nasdaq and Standard & Poor's 500 Index all were at their lowest since mid-October 1998.
Despite concerns about the financial infrastructure in Wall Street, the usual number of traders and other employees on the NYSE floor arrived for work and business proceeded normally, though the trading floor smelled heavily of smoke.
The sell-off was most dramatic in industrial sectors which anticipate huge losses because of the public's loss of faith in air travel. These included airlines, some of which saw almost half their share values wiped out, hotels and travel companies. Insurance companies were badly hit and financial conglomerates like American Express saw share value fall on fears of a slump in consumer confidence.
While the loss was dramatic, analysts pointed out that it was much less in percentage terms than the one-day fall in the markets on the outbreak of the Gulf War in 1988, and that there was no atmosphere of panic selling.
The loss of business by airlines for four days and an expected big reduction in air travel, had a huge impact on profit forecasts in an already troubled sector.
American Airlines and US Airways saw their share value plunge steeply and Continental Airlines fell $19.44 at $20.20, or more than 49 percent after laying off 12,000 staffers and warning it could file for bankruptcy without assistance.
Continental chief executive Gordon Bethune warned that 100,000 airline jobs could be lost.
Defence industry companies saw their stock rise as did data storage firms like EMC. Spending on these sectors is expected to increase as the crisis unfolds. Defence companies which rose included Raytheon, Lockheed Martin, Northrop Grumman and Arms manufacturer Sturm Ruger.
Aerospace companies may have to cut jobs and research as the airline recession reaches suppliers. United Technologies sank $10.39 to $55.81, Honeywell International $5.56 to $30.14 and Boeing fell $5.50 to $37.96.
US television networks could lose hundreds of millions of dollars from broadcasting commercial-free news coverage for several days. Disney, which owns ABC, fell 15.6 per cent to $19.94, the largest percentage decline on the Dow Jones.
By midday about 1.6 billion shares changed hands on the Big Board and more than 1.5 billion on the Nasdaq, more than twice the normal volume at midday.
The action by the Federal Reserve, which came just after a dawn conference call among chairman Alan Greenspan and Fed bank presidents, cut interest rates by a half percentage point to 3 per cent from 3.50 but did little to boost the stock market.
As usual in times of turmoil, gold was seen as a safe haven and silver also increased in price.
The nation's financial leaders had called on investors to treat the market's reopening as a buying opportunity instead of a reason to sell. But New York Stock Exchange chairman Richard A. Grasso said: "Today's market is not important. It's the market a year from now, two years from now."
