- The Washington Times - Tuesday, September 25, 2001

The stock market rebounded yesterday, recovering some of its more than $1 trillion in losses last week.
The Dow Jones Industrial Average soared 368 points to 8,604, recouping 27 percent of last week's record 1,370-point drop. Broader indexes also gained from 4 percent to 5 percent. Bargain-hunters drove the blue-chip Standard & Poor's 500 index back over 1,000, while the Nasdaq Composite Index jumped 76 points to 1,499.
President Bush, reflecting on the stock market's tumble last week, reminded investors that the United States remains the world's strongest economy despite the blow from the Sept. 11 attacks on the Washington area and New York. He conceded for the first time, however, that economic statistics in the months ahead are likely to look bad and that people are hurting from a rash of layoffs since the attacks.
"You bet there are problems with our economy short-run, but not long-run," he said. "I'm concerned about the shock this has had on our economy. There are a little too many layoffs. And anytime somebody loses a job in America, I'm concerned.
"While the numbers aren't going to look too good in the short run, we'll be a stronger nation as a result of this," Mr. Bush said, emphasizing that any downturn in the economy won't deter him from his all-out war on terrorism. "These terrorists thought they could diminish our soul. They made a terrible mistake."
Most economists now expect the attacks to push the already fragile U.S. economy into a recession that is likely to last through the end of the year. Any weakness in the U.S. economy is expected to pull down the economies of U.S. trading partners as well.
Worries that a recession in the United States will reverberate worldwide sparked the biggest plunge in oil prices yesterday in a decade. The 16 percent drop to $21.80 in futures prices for crude oil on the New York Mercantile Exchange helped give a lift to stock markets in London, France and Germany.
Declining oil prices also are a boost for American businesses hit hard in the past two years by skyrocketing energy prices. Shares gained broadly on the U.S. exchanges, led by retailers, banks, insurers and technology companies battered in last week's market rout.
Airline stocks, which got plundered last week, gained on Congress' quick enactment of a $15 billion assistance package on Friday. Congressional leaders are also preparing legislation to try to put to rest the fears Americans have of flying since the attacks by giving responsibility for airport security to the federal government for the first time.
Some investment analysts saw yesterday's rally as a sign that the big stock downdraft last week was a "selling climax" of the kind that usually marks a turning point in a bear market.
One prominent Wall Street bull, Abby Joseph Cohen of Goldman Sachs & Co., recommended that investors move more money into stocks, citing among other things Congress' rush to approve $55 billion of airline and victim-rescue assistance, which will reduce economic dislocations from the attacks.
Others were skeptical that the sell-off is over, however, particularly because the market has yet to reflect the impact of the drawn-out war against terrorists promised by the president.
"I would love to join those who think we made a bottom on Friday and the worst is over," said Ed Yardeni, chief investment strategist with Deutsche Banc Alex. Brown.
"True capitulation occurs when people give up entirely on the long-term prospects for the economy. I think we're in that process now," but the markets and the economy are still in a steep downturn and have not yet reached a turning point, he said.
Although stock prices have fallen to cheap levels, a prolonged war or a prolonged retrenchment by American consumers could prevent a rebound in the economy and the markets for months to come, he said. "Even if there are no more attacks, it could take six to 12 months for consumers to really regain their confidence and feel safe again," he said.
"There are very few events that can actually 'scare' some consumers from spending," said Diane Swonk, chief economist with Bank One. "The events of [Sept. 11] fall into that category."
While the attacks "turned our world upside-down" and ushered in a recession, she said, the response of Americans as they rebuild, beef up security and boost preparedness for terrorist attacks in the future actually will make the economy stronger over time.
The aid approved by Congress will be used to rebuild lower Manhattan and the Pentagon and to compensate industries hit hardest by the attacks.
Private spending also will surge in such areas as building security, information backup systems, telecommunications, cell phones, Internet capabilities, trucking, rail, rental vehicles, buses and advertising as companies take advantage of the public's intense focus on news developments in the wake of the attacks.

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