- The Washington Times - Saturday, October 13, 2001

Concerns about terrorism haunted Wall Street again yesterday as news of a fourth anthrax case and a record drop in retail sales after the Sept. 11 terrorist attacks sent stocks on a roller-coaster ride.
After three weeks of rising optimism that had lifted several major stock indexes to pre-attack levels, the Dow Jones Industrial Average fell more than 100 points on a morning report showing that retail sales plunged by 2.4 percent in the wake of the attacks the most since the last recession and one of the worst drops ever recorded by the Commerce Department.
The blue-chip index plunged even further in the afternoon to a 216-point loss after NBC Nightly News said that one of its New York employees had tested positive for skin anthrax.
But by the end of the day, Wall Street's newfound optimism that the economy and consumers are gradually recovering from the attacks helped to stem the losses, with the Dow closing down 66 points at 9,344. The Nasdaq Composite Index managed to erase a 30-point loss and end up one point at 1,703.
"The market appears to be reacting rationally to this, finding this is relatively isolated," said Chris Wolf, equity market strategist at J.P. Moorage Private Bank. Federal investigators said they have not detected any connection between the NBC anthrax case and the Sept. 11 attack that leveled the World Trade Center in New York.
But analysts said the spreading anthrax scare three cases were found earlier this month at a media outlet in Florida served to show how vulnerable the markets and the economy are to further terrorist attacks.
"The market is very fragile now. People are still reacting with their emotions," said Jon Brorson, director of equities at Northern Trust. "Another terrorist attack could cause a setback for stocks."
Yesterday's retail-sales report showed how devastating the Sept. 11 events were on consumer psychology and the economy.
The drop in sales during the month in virtually every area except essentials such as food, fuel and drugs wiped out all previous sales gains racked up by the nation's retailers this year, the department said.
"Today's decline in sales confirms that we are in recession," said Joseph Stiglitz, economic adviser to former President Clinton and winner of this year's Nobel prize in economics.
The massive loss of business by retailers ensures that more cuts in jobs and production lie ahead, economists said.
It is rare for sales to drop at all, thanks to the propensity of most American consumers to spend what they earn, economists say. The only recent comparable drop was a 2.2 percent decline in retail sales when Operation Desert Storm began in January 1991, in the depths of the 1990-91 recession.
"This retail sales number is a setback" for those who thought that the economy was going to recover in the next six months, said Joe Pregiato, an investment manager at Josephthal & Co.
The news hit the stocks of prominent retailers, including Wal-Mart, Home Depot and Target, several of which had benefited from optimism earlier this week that consumers are starting to flock back to the malls and spend again.
Bolstering that optimism was a report from the University of Michigan yesterday that showed consumer confidence edged up in early October after plummeting in the wake of the terrorist attacks.
Recent polls show that consumers also are starting to get over their fears of air travel, partly as a result of stringent security measures adopted at airports.
Joel Naroff of Naroff Economic Advisers said the collapse seen in the September sales report does not reflect the gradual comeback in spending in recent weeks as consumers shed their fears and ventured out again.
"Retailers are cutting prices and sales have rebounded at the malls," he said. "Deep discounts and cheap financing have brought buyers back to the showrooms."

LOAD COMMENTS ()

 

Click to Read More

Click to Hide