Dow Plunges Seven Percent After Four-Day Long HiatusBy Paul Blustein
and Carol Vinzant
THE WASHINGTON POST -- WASHINGTON
A joint effort by Washington, WallStreet and corporate America to buoy the U.S. stock market failed to keep a wave of selling from battering share prices, as the Dow Jones industrial average dropped 684.81 points, or 7 percent, on the first day of trading since the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon.
The Dow’s plunge, its worst point loss in history, came despite an unprecedented bid by the Bush administration, the Federal Reserve, Wall Street executives and major U.S. corporations to prop up the market in the hopes of sending a message that the U.S. financial system could shrug off the terrorist assault.
The Fed provided the market with a pleasant surprise shortly before it opened by cutting short-term interest rates by half a percentage point -- the eighth reduction by the Fed this year -- and central banks in Europe and Canada also cut rates. But while analysts said the Fed’s action may have helped brake the market’s fall, it did not keep share prices from sinking immediately after the market opening, which got off to an emotional start with two minutes of silence and the singing of “God Bless America” on the floor of the New York Stock Exchange.
President Bush signaled around noontime that he was prepared to support a new tax cut to boost the economy, as well as a bailout of the beleaguered airline industry -- yet stocks continued to spiral downward.
Amid record volumes of more than 2.3 billion shares on the NYSE, the selling pressure gathered momentum throughout the day, despite announcements by companies pledging to buy their own stock, and exhortations by top U.S. policymakers, notably Treasury Secretary Paul O’Neill, who predicted that the market would soon be headed for new records.
Airline stocks got clobbered, with most tumbling 40 percent to 50 percent as carriers announced they were cutting flights and jobs to conserve their dwindling cash, and industry executives pleaded for federal assistance. Also hard hit were retail, financial, oil, media, auto and tech stocks. Only defense contractors, metals stocks, security firms and some communications issues resisted the selling.
The Dow’s loss was well below the 22.6 percent drop of the 1987 crash. Market officials voiced relief that trading functioned smoothly, without the panic or disruption many had feared after last week’s four-day hiatus, the longest since the Great Depression.
But the benchmark Dow ended the day at 8883.40, its lowest level since December 1998. The Nasdaq composite index also fell about 7 percent, closing at 1,579.55, down 115.83. The broader Standard & Poor’s index of 500 stocks lost almost 5 percent.
The markets were reflecting widespread forecasts that the already-slowing economy would weaken further because of the weakened confidence of American consumers and on industries such as airlines and travel.