Merrill Lynch & Co, the biggest US brokerage, urged its 15,000 brokers to tell clients holding more than US$1.6 trillion in assets not to sell as trading resumed a week after the terrorist attack on the World Trade Center closed US markets for the longest stretch since 1933.
The message, delivered by Merrill's top brokerage executives James Gorman, Robert Mulholland and Dan Sontag, was similar to one delivered by competitors Charles Schwab Corp, the biggest discount broker, Morgan Stanley Dean Witter & Co, Salomon Smith Barney, the brokerage unit of Citigroup Inc, and others.
PHOTO: AFP
"I received a letter from my broker that essentially said to wait it out," said Kaija Siftar, a 54-year old native of Bethlehem, Pennsylvania who runs a title insurance company. The one-page letter from her broker, Dean McDermott, who works at the firm of Steven Falk, "didn't address short-term performance," she said. "It was asking clients not to panic." Wall Street firms advised the more than 78 million US individuals who own shares outright or through mutual funds to hold their shares in an effort to counter any selling by institutions.
Those who sat tight lost plenty. The NASDAQ Composite Index falling 6.8 percent, the Dow Jones Industrial Average plunging 7.1 percent and the Standard & Poor's 500 Index sliding 4.9 percent.
Airline shares tumbled as carriers reduce flights because of a decline in demand. US shares fell in part to catch up to losses in Europe last week, such as the 8.4 percent drop in the Dow Jones Stoxx 50 Index and the 12 percent decline in Germany's Dax Index.
The Federal Reserve yesterday cut its benchmark interest rate for overnight bank lending by a half point to 3 percent.
In a full-page newspaper advertisement in the New York Times yesterday, the chief executives of 10 of the biggest financial firms, including Merrill's David Komansky, American Express Co's Kenneth Chenault and Citigroup's Sanford Weill, sought to reassure investors and calm the markets.
"Recent events should not cause Americans to let go of their financial dreams," the ad said. "While there might be some short-term uncertainty in the markets, comparable moments in history -- Desert Storm, the Cuban Missile Crisis, even the attack on Pearl Harbor -- have seen the markets regain their strength within months."
Morgan Stanley's real estate analyst Gregory Whyte led off a conference call to the firm's clients by saying there likely wouldn't be any changes made to stock ratings yesterday. "It's sort of an unwritten firm policy that we announce no rating changes today," he said.
Merrill, in an e-mail to brokers, said stocks tend to fall after violent events, and cited President John F. Kennedy's 1963 assassination and the 1990 start of the Persian Gulf War. Shares then often rebound, the firm said.
"During the coming days, weeks and months, navigating through the financial markets will be challenging," officials at Merrill's asset management unit wrote. "Investors should take a historical perspective -- looking at past events and their effects on the market," the e-mail said. Merrill said calls from customers were 50 percent higher than usual.
Charles Schwab and ETrade Group Inc also sent messages and made calls to some customers recommending they not sell shares when trading opens.
In an e-mail to clients, 64-year-old Chairman and Co-Chief Executive Charles Schwab urged investors to take "a long-term approach" to investing. "My advice to you is the same investment advice I have offered clients for over 40 years: invest for the long term and maintain a diversified portfolio -- and stay calm during the rough times."
ETrade's Chairman and Chief Executive Christos Cotsakos, who was in New York at the time of the attack, sent out similar messages.
Ameritrade's Chief Executive Joseph Moglia, two of whose children worked across the street from the World Trade Center at Merrill's headquarters, set up a group of senior managers at the Omaha, Nebraska-based. "The real emphasis of what we're telling clients is to do everything you can to take a look at your portfolio," he said. "A downward move in the market might be looked at as a significant buying opportunity later on."
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