Nation’s markets recover following sharp downturn

Latasha Webb

One month after the Dow Jones industrial average’s biggest one-day loss in history, the stock market has returned to pre-Sept. 11 levels.

At the end of last week, the Dow advanced 2.5 percent, the Nasdaq gained 6.1 percent and the Standard & Poor’s 500 index climbed 1.9 percent.

By the market’s closing Monday, the Dow had continued to advance, gaining a final 3.46 points, or 0.04 percent.

Nasdaq and the S&P 500 dropped 0.42 percent and 0.15 percent, respectively, by market’s close Monday afternoon.

State economist Tom Stinson said the Nasdaq and S&P drops after last week’s improvement are nothing to be concerned about.

“The market will do what the market will do,” Stinson said. “Over the long term – several years – I’m sure it will move upward, but in the short term it could do just about anything.”

Stinson said some economists are speculating too soon on what the market’s changes mean for the economy.

“The stock market is a leading indicator for trends in the economy, but it’s not a consistent indicator,” he said. “You’ve got to look at it over a longer time period than just one month.”

Although economists are optimistic the upward movement will continue, there are still concerns about the effect war might have on public spending and the stock market.

University economics professor Edward Foster said though war has helped the economy in the past, it’s not the best option.

“World War II came along when the country was still in a pretty deep slump,” he said. “Some government spending helped. In the case of a recession, war can move us out of a recession.”

Foster said war was not the best solution, however.

“Of course when you’re threatened you need to spend to protect yourself, but from an economic perspective, it’s not a benefit. War is not an intelligent way to pick the economy up,” he said.

Stinson said the economy benefitting from war is something that happened once, but since then people have believed that it is a trend.

“The war being good for the economy story is really based on World War II and the recovery after the Depression,” he said. “More recently, war hasn’t been good for the economy. It typically has increased the rate of inflation, and that’s not good long-term.”

Still, economists who predicted a six-month recovery period are breathing a sigh of relief as the market has seemingly recovered in only a month.

“It is good news,” Stinson said.

 

Latasha Webb welcomes comments at [email protected]