Anyone looking at the US stock market's performance in the past week can make a connection between Osama bin Laden and Adolf Hitler.
The Dow Jones Industrial Average plummeted 14.3 percent, to 8,235.81, as trading resumed after terrorist attacks on the World Trade Center and the Pentagon. Bin Laden, a Saudi millionaire based in Afghanistan, is the prime suspect in the attacks.
PHOTO: REUTERS
The average's percentage decline was the largest since the week ended July 21, 1933, when the 30-stock benchmark recorded a 15.6 percent loss. Back then, the US was the midst of the Great Depression -- and in Germany, Hitler had just come to power.
Since then, the worst showing for the Dow industrials was a 14.2 percent loss for the week ended May 17, 1940, just after Hitler's forces started an invasion of France that led to the evacuation of the British army at Dunkirk.
Expectations that the terrorism linked to bin Laden will cause the US economy to slow further and depress corporate earnings were behind this week's decline, which reduced the market value of US companies by about US$1.38 trillion.
"The reality is coming home that this is going to be a severe economic downturn," said Tim Stevenson, who manages the US$450 million Evergreen Special Equity Fund in Charlotte. "Investors are coming to grips with that."
The economy grew in the second quarter at a 0.2 percent annual rate, the slowest pace in eight years, government figures showed. Economists expect it to contract at a 0.5 percent rate in the third quarter and a 0.7 percent rate in the fourth, according to a Blue Chip Economic Indicators survey.
Two consecutive quarters of declines amount to a recession, according to a common definition. That prospect, coupled with the possibility that the US will invade Afghanistan if the country doesn't turn over bin Laden, led to a renewed rally in Treasury securities as the week ended.
In Firday's trading, the benchmark 5 percent note maturing in 2011 climbed 11/32, or US$3.44 per US$1,000 face amount, as its yield dropped 5 basis points to 4.69 percent. For the week, the 10-year note posted a loss of 1 5/32 after rising almost two points the previous week.
The Swiss franc, a haven in times of war because of Switzerland's political neutrality, rose to a record of SF1.4405 to the euro and reached a 21-month high of SF1.5670 to the dollar as the week ended. The franc has risen at least 3 percent against 16 major currencies since the attacks.
Gold also proved to be a haven for some investors. The metal's price for immediate delivery ended the week at US$291.50 an ounce, a 2.1 percent gain, and reached a 19-month high of US$295.10 in London trading.
Even so, commodity prices dropped amid concern that a slumping US economy will mean less demand for raw materials.
Crude oil for November delivery fell 6.7 percent in New York, to US$25.97 a barrel. The Goldman Sachs Commodity Index, tracking 26 items and focused on energy, had its largest percentage loss -- 9.9 percent -- since the week ended Jan. 18, 1991.
Similarly, gains among gold stocks weren't enough to prevent the Standard & Poor's 500 index from falling below 1,000 for the first time in three years. The stock-market benchmark retreated 12 percent to 965.80.
Just 28 stocks in the S&P 500 rose. Gold producers such as Placer Dome Inc, which jumped 20 percent to US$13.32, and Newmont Mining Corp, which rose 5.3 percent to US$22.27, were among them.
The NASDAQ Composite Index fared even worse than the S&P 500 and the Dow, as it dropped 16 percent for the week to 1,423.17, a three-year low.
3Com Corp, Comverse Technology Inc, Exodus Communications Inc and Metromedia Fiber Network Inc were the only stocks to rise in the NASDAQ 100 index, consisting of 100 of the largest NASDAQ companies. The latter two trade for less than US$1 a share.
More than 10 billion shares changed hands on the New York Stock Exchange this week as trading resumed after a four-day halt, prompted by the attacks. Each day was one of the 10 busiest days in Big Board history.
Several companies dropped after lowering profit forecasts, including EMC Corp, the biggest maker of data storage systems; Eastman Kodak Co, the biggest photography company, and Dow Chemical Co, the largest US chemical company.
General Electric Co, the largest company by market value, fell 20 percent for the week to US$31.30 after cutting its third-quarter earnings estimate by US$0.04 a share, to US$0.33. The revision accounted for expected losses at Employers Reinsurance Corp, a unit that provided coverage on the World Trade Center and the four airplanes used in the attacks.
Nevertheless, Chief Executive Jeff Immelt reaffirmed General Electric's profit forecasts for this year and next. The prediction triggered a stock-market rally that enabled the Dow industrials to recoup an early 314-point loss and move higher.
The gains lasted for only for a few minutes, though. The average ended the day lower, as it had the previous four days. It hasn't closed higher since Sept. 5.
Monday's drop of 684.81 points, or 7.1 percent, was the largest point loss ever and the largest percentage decline in almost four years.
After falling 0.2 percent on Tuesday, the Dow industrials slipped 1.6 percent on Wednesday and sank another 4.4 percent on Thursday. Wednesday's decline would have been even steeper if the average hadn't climbed about 280 points from the day's low during the last 90 minutes of trading. Today's loss equaled 1.7 percent.
Travel-related companies, such as airlines and hotels, took some of the week's biggest losses as business dried up following the attacks. AMR Corp, the owner of American Airlines, tumbled 40 percent to US$17.90. US Airways Group Inc fell 61 percent to US$4.55.
Hilton Hotels Co dropped 35 percent to US$7.25.
Automakers also slumped as security-related delays along the US-Canada border impeded parts shipments, leading to production cutbacks. General Motors Corp dropped 22 percent to US$40.25, and Ford Motor Co fell 21 percent to US$15.34.
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