Stocks fall again, but Dow stages late comeback
From wire reports
NEW YORK -- Economic fallout from last week's terrorist attacks sent stocks spiraling for the second time in three days Wednesday. Only a late burst of buying saved the Dow Jones industrials from their worst three-day point loss ever.
The Dow, down 423 points in midafternoon, recovered to a loss of 144 following reports that the Pentagon had ordered fighters and bombers to begin moving to the Persian Gulf area, the first concrete sign of preparations to retaliate for last week's terrorist attacks.
The Dow closed down 144.27, or 1.6 percent, at 8,759.13. So far this week, the Dow is down 746.81, or 8.8 percent.
At its low, the Dow had accumulated a three-day loss of more than 1,100 points. Its worst three-day loss was 984 points in August 1998. Broader indexes also fell. The Nasdaq composite index was down 27.28 at 1,527.80, a 1.8 percent loss, while the Standard & Poor's 500 index was off 16.64, or 1.6 percent, at 1,016.10.
Wednesday's trading showed how unpredictable the market is likely to be in the coming days. The Dow had appeared to steady Tuesday, falling a mere 17 points, after a record 684-point plunge Monday.
"I think that's what the market needed to see. They wanted to get rid of uncertainty and this helped," said Charles White, portfolio manager at Avatar Associates.
Despite the comeback, thousands of job cuts at Boeing, American Airlines and others following the attacks heightened fears about the already fragile economy.
In Washington, Federal Reserve Chairman Alan Greenspan urged congressional leaders Wednesday to focus on restoring American economic confidence but not to rush a stimulus plan that could have uncertain effects.
President Bush, meanwhile, sought from the White House to assure Americans that the government will pay full attention to the shaky economy after last week's terrorist attacks.
"I'm going to work with Congress to send a clear message to America, American workers, American business people, that this government will respond to this emergency," the president told reporters before an Oval Office session with leaders from Capitol Hill.
House Majority Leader Dick Armey, R-Texas, told reporters after a private meeting at the Capitol that Greenspan said lawmakers must determine how to "signal confidence to the American people, whether it be with respect to investment activity or consumption activity."
Republicans and Democrats have been discussing an economic stimulus package focused on tax cuts aimed at business and investing, particularly cuts in capital gains taxes. But Greenspan said Congress should "get a better assessment of the overall impact" before moving forward with stimulus legislation, according to participants in the meeting.
"We're trying to make sure what the problem really is before we stick our necks out," House Speaker Dennis Hastert, R-Ill., said.
Greenspan, who will testify about the economy before a Senate committee today, met with a bipartisan group of congressional leaders including Hastert and Senate Majority Leader Tom Daschle, D-S.D. Lawrence Lindsey, the White House chief economic adviser, and former Clinton administration Treasury Secretary Robert Rubin also took part.
The stimulus discussion touched on cutting capital gains taxes -- Republicans have been pushing a cut in the top long-term rate from 20 percent to 15 percent -- as well as unspecified reductions in taxes on business earnings and whether to accelerate parts of the recently passed 10-year, $1.35 trillion tax cut that have yet to take effect. No decisions were made.
House Minority Leader Dick Gephardt, D-Mo., said Greenspan also told the group it is too early to gauge the long-term impact on the economy of last week's terror attacks, although obvious immediate problems exist such as those facing the airline industry.
Gephardt said the session's main message was, "We need to take a little more time here to see exactly where we're headed."
After the Greenspan session, congressional leaders met with Bush at the White House to discuss the economy and a possible stimulus package. Bush spokesman Ari Fleischer earlier had said the president is leaning toward support for such a plan but decisions had not been made about its elements.
Help for airlines
In the Oval Office, Bush told reporters the government already has begun responding to the economic problems with a $40 billion emergency spending bill and was working toward agreement on a package to help the airlines. Bush said a broader economic response also was likely.
"Make no mistake about it, this has affected the economy in a big way," the president said.
Greenspan's take-it-slow advice came as talk on Capitol Hill about a stimulus plan based on capital gains cuts threatened to undermine the bipartisan unity that has held sway since the Sept. 11 attacks. Many Democrats said they would have difficulty supporting a tax cut they believe primarily benefits wealthier taxpayers and has been pushed by the GOP for weeks.
"This is not an opportunity to wrap the flag around every tax cut that certain groups have ever wanted to do," said Rep. Charles Rangel of New York, senior Democrat on the House Ways and Means Committee.
With the nation on a war footing, leaders of both parties want to avoid public partisan debates on divisive issues, preferring to work out differences in private. A capital gains tax cut would be a difficult issue to resolve in any case, but GOP leaders said it remained on the table.
Other tax suggestions include a second round of tax rebate checks, perhaps focusing on workers who did not get them this year; changes in depreciation rules so businesses can deduct certain costs more quickly; investment tax credits for business; and an increase in the amount of equipment costs a small business can deduct.
There also has been discussion of extending unemployment benefits to help deal with layoffs, lawmakers said.