Stocks could not hold on to modest gains Wednesday and finished with minor losses. It was a subdued session as Wall Street honored those who perished in last year's terror attacks on the World Trade Center and the Pentagon.
The Dow Jones industrial average finished down 21.44 points, or 0.25%, to 8,581.17. The Nasdaq composite index slipped 4.64 points, or 0.35%, to 1,315.45. And the broader Standard & Poor's 500-stock index fell 0.13 point, or 0.01%, to 909.45.
All in all, trading was light amid the solemn mood. Getting through September 11 without any significant incidents of terrorism "will constitute [getting past] some kind of hurdle, given the fact that economic underpinnings have been okay, if not splendid. And given the level of inflation and interest rates we could start to see some real buying interest," says Alan Hoffman, senior portfolio manager at Value Line Asset Management.
However, uncertainty over a possible war with Iraq has also been worrying investors. President Bush will address the U.N. Thursday and administration members have hinted that he will urge the U.N. to approve military action against Iraq.
S&P MarketScope's Paul Cherney expects Thursday to open on a weak note. And the session should be under some pressure ahead of Bush's U.N. address and Federal Reserve chief Alan Greenspan's testimony before the House Budget Committee.
"The current market is a complex situation both technically and psychologically," says Cherney. "I think in the short-run the downside risk appears limited versus the potential reward of higher prices sometime in the next 10 trade days."
"Overall, the economy has withstood the terror better than we expected, as American consumers proved very resilient," says David Wyss, chief economist at Standard & Poor's. He notes that the Fed and Congress responded quickly with four cuts in interest rates after the attacks and stimulative fiscal policy via the June 2001 tax cuts and increased spending on defense and national security.
Going forward, improvement in the economy will be gradual. "We expect only a slow recovery, however, in part because there wasn't much of a recession to recover from," Wyss says. He expects the housing boom to end eventually while business spending will be a hurdle as companies work through the overinvestment of the past decade.
Meanwhile, markets should remain pressure from other elements. "Business uncertainty and pessimism have continued longer than might seem reasonable given the strong GDP trajectory," says Mike Englund, chief economist at MMS International, though he notes that business investment spending on equipment is posting a slow-but-steady acceleration. Accounting scandals, more than September 11, have caused the markets to remain in a funk. "The jury is still out on how long the depressed behavior of the business sector, for whatever reason, will continue," Englund says.
Company news was scarce Wednesday, though there was some scattered activity. A U.S. court adjourned a hearing on whether to overturn a temporary order blocking any sale of Hershey Foods (HSY) without making a ruling. Milton Hershey School Trust, the main shareholder of the candy maker, aims to sell the company. The sale is opposed by members of the local community who believe it may cause harm to the economy there. Food giants like Nestle -- widely believed to be a potential buyer -- are watching developments in the case closely.
Tyco International (TYC) named David FitzPatrick, the 48-year-old CFO of United Technologies Corp. (UTC) to replace Mark Swartz, whose association with former chief executive and chairman Dennis Kozlowski forced him out.
In a quiet session that closed at 2 p.m., U.S. Treasuries finished lower. The first anniversary of September 11 was marked with solemn memorials and tributes. It was also uneventful, terrorist-wise. Consequently, Treasuries unwound all of Tuesday's "orange alert" gains in somber trading, says MMS International. Meantime, early gains in U.S. equity futures also turned attention away from bonds. The Federal Reserve will release its Beige Book anecdotal report of economic condiditons to accommodate the early close in Treasuries.
In summary, the Beige Book met expectations, says Trip Jones, of Fulcrum Global Partners. "There are mixed signals on
growth, the tone was quite cautious and there was absolutely no sense of momentum."
European stocks finished higher. London's Financial Times Stock exchange index closed higher by 35.20 points, or 0.84%, to 4,210.70. Germany's DAX index gained 90.00 points, or 2.58%, to 3,584.69. France's CAC index finished up 97.38 points, or 2.95%, to 3,397.02.
Asian stocks ended mixed. Tokyo's benchmark Nikkei 225 index gained 90.77 points, or 0.98%, to 9,400.08. In Hong Kong, the Hang Seng Index lost 3.42 points, or 0.03%, to 9,882.35.