- The Washington Times - Wednesday, September 19, 2001

Stocks steadied yesterday, following Monday's drubbing, in the second day of Wall Street trading since the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon.
The Dow Jones Industrial Average and other major indexes fluctuated around the unchanged level, with the Dow climbing as much as 100 points to more than 9,000 in an early afternoon rally only to lose that gain and end down 17 at 8,903. The Nasdaq Composite Index also mustered a rally early in the day, but a wave of afternoon selling sent the technology-heavy index down 24 points to 1,555 at the end of the day.
Stock traders said that despite the low prices for blue-chip American corporations, which are enticing to buyers, the market remains depressed because of the damage the attacks did to the American economy and anxiety about possible military action by the United States.
"The stock market is going to be a tough place to make money in the near term," Eric Thorne, a portfolio manager at Bryn Mawr Trust Co., told Bloomberg News. "The terrorism act and its effect on the economy will drive stocks."
Central banks continued their efforts to bolster the global economy, which many analysts say is in danger of falling into recession as terrorist fears put a damper on spending by American consumers and businesses. The Bank of England cut interest rates by a quarter percentage point, while the Bank of Japan lowered rates almost to zero with a 0.15 percentage point cut in its key bank lending rate to 0.10 percent.
An examination of Federal Reserve actions in the last week shows the American central bank is making extraordinary accommodations to avert a financial collapse, pushing its main bank lending rate almost to zero far below the Fed's stated target of 3 percent as it pumped more than $100 billion into the banking system and financial markets.
The Fed's efforts, which are the most strenuous since the October 1987 stock market crash, appear to have succeeded in keeping the financial system afloat, but they did not prevent the Dow from plunging a record 685 points on Monday as investors weighed the implications of the attacks.
Americans are closely watching the stock market in hopes of a return to normalcy. Regulators are particularly concerned about the stock market's behavior in the wake of the attacks because rises and falls in the market have been closely linked to the ups and downs of consumer confidence in recent years.
"Markets have a normal feel today, as normal as can be expected" in light of the devastation to the World Trade Center only blocks away from the New York Stock Exchange, said First Albany chief investment officer Hugh Johnson. "I do not ever recall a day of greater turmoil or a higher level of intensity than [Monday]."
Other financial markets also have big stakes in how U.S. stocks fare in the aftermath of the attacks. The dollar has lost considerable ground against the euro and the yen since the tragedy, and dollar traders say it will continue to be weak as long as the stock market sags.
U.S. leaders are concerned about the dollar because America must maintain a strong currency if it is to remain an attractive place to invest. Investments flowing into stocks and bonds from abroad are needed to finance America's huge trade deficits.
Some analysts say the emphasis on the stock market is misplaced. Dean Baker of the Center for Economic Policy Response says the stock market needed to drop because it is overvalued in light of the plunge in corporate earnings in the past year. With only half of Americans owning stocks, the decline in profits is actually good for most Americans because it means corporations are putting more of their money into wages and benefits, he said.
"The identification of the stock market's movements with trends in the overall economy may be greatly exaggerated," he said, noting that the vast American economy and work force were largely untouched by the terrorist attacks and remain the most formidable assets of the United States.
"The country still possesses the basis for a strong economy even though the conditions may not exist to support an overvalued stock market," he said.

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