Investors had their fingers crossed as the stock market did its best to return to normal Tuesday – after the market saw history’s largest single-day point drop in the Dow Jones industrial average a day earlier.
It was largely successful.
At day’s end, the Dow was down 17.30 points and the Nasdaq lost 24.47. The Standard and Poor’s 500 index finished down 6.03 points.
Several indicators, including the Dow, appeared to bounce back from Monday’s disastrous closing at 684 points down, but by late afternoon they were slipping again.
“There was a good rally in the afternoon,” said Bruce Erickson, a University professor of business and government. “But towards the end, it went down again.”
Despite the losses and slow trading, America’s brokers were relieved the market looked more like its pre-tragedy self.
“Our financial markets have resumed their integral role in the American and global economies,” said New York Stock Exchange Chairman and CEO Dick Grasso in a prepared statement Monday evening.
But some experts aren’t so sure the market can return to normal just yet.
“The rest of the world markets have rebounded – almost all of them,” Erickson said, adding that Tuesday’s loss “indicates that anxiety is deep; suspicion of the market is pretty deep.”
John Chipman, University regents professor of economics, agreed.
“Usually a big drop is followed by a turnaround,” Chipman said. “I think it’ll take another six or so months for the market to recover.”
However, the Federal Reserve Board is taking steps to ensure a healthy stock market and economy.
The central bank reduced its short-term rates Monday from 3.5 percent to 3.0 percent, the lowest percentage rate since 1992.
The bank’s board has also developed a policy to allow banks to assist people who have been affected by Tuesday’s tragedy.
In a Sept. 14 press release, the Federal Reserve Board said it “encourages state member banks and bank holding companies to work with customers who directly or indirectly have been affected by the events of September 11.”
John Boyd, a University professor of finance, said he does not view Tuesday’s market as a failure, calling the Dow’s finish “extremely good news.
“Because when the market finished up (Monday), it was down with world markets. Now it seems to be stabilizing,” he said, adding had the market continued to decline substantially, “that would’ve been scary.”
Although Tuesday’s market proved to be more stable than Monday’s, there is still suspicion the economy is going to, and will continue to, decline.
The Federal Reserve Board said in a press release Monday that the economy was faltering before Sept. 11.
“Even before the tragic events of last week, employment, production and business spending remained weak, and last week’s events have the potential to damp spending further.”
The long-term prospects for the economy remain favorable, the board said.
Chipman agreed.
“You can’t blame people for selling when they’re worried about saving their assets,” he said. “But if there are no more terrorist incidents like this in the next few months, then I would expect things to start to return to normal.”
