Sell-off blamed for big declines

and Eileen Alt Powell ~ The Associated Press

NEW YORK -- In the smoky shadow of the World Trade Center, stock prices plummeted but stopped short of collapse Monday in an emotional, flag-waving reopening of Wall Street.

The Dow Jones industrial average lost 684.81 points and ended the day at 8,920.70 -- a record one-day point drop and the first close below 9,000 since Dec. 21, 1998. The previous one-day record loss was 617.78 on April 14, 2000.

Volume on the New York Stock Exchange was a record 2.33 billion shares, surpassing the previous mark of 2.13 billion on Jan. 4.

The Nasdaq index fell more than 115 points to 1,579.55, like the Dow down 7 percent. The broader Standard & Poor's 500 index was down 53.77 at 1,038.77.

The sell-off was expected as trading resumed after a four-day hiatus -- its longest shutdown since the Depression -- and some analysts had predicted worse. The loss was less than a third of the 22-percent plunge when the Dow lost 508 points in the 1987 crash.

Just hearing the opening and closing bell was a victory for some.

"Overall, under the circumstances, it is very encouraging" that Wall Street didn't fall harder, said Richard Dickson, a market analyst at Hilliard Lyons in Louisville, Ky.

The market had been going lower before the destruction of billions of dollars in assets in the attacks in New York and Washington and the increased likelihood of a recession. That made Monday's fall "almost inevitable," said Mark Vitner, an economist at First Union Securities in Charlotte, N.C.

But was the worst over?

"We're going to rebuild and we're going to be stronger," said trading specialist James Maguire Jr., who lost three friends in the World Trade Center. "Once the market has a couple of days, I think things will settle down."

Just getting the markets open was a struggle that required city work crews, utilities and brokerage house technicians to work through the weekend to get telephones and data lines up.

There were a few glitches. Instinet, the electronic stock-trading system, said 85 percent of its customers were able to connect to its network to conduct trades. Most who couldn't were small companies.

Security was heavy, with dozens of policemen on streets near the exchange and National Guard troops in camouflage military vehicles.

Soot from fires at the trade center towers hung in the air, and the acrid smell of smoke drifted even onto the trading floor of the stock exchange. Outside, a huge American flag was draped across the exchange's famed columns. Inside, some traders hung photos of the twin towers at their desks.

The Dow fell 629 points in the first hour of trading, then recovered and slipped again in the afternoon. At its worst, it was down almost 720.

Airlines, insurance and entertainment stocks were among the hardest hit. AMR Corp., the parent of American, plummeted 39 percent, while United parent UAL Corp. dropped 42 percent.

There were some winners, chiefly in defense and security, which could see increased government spending.

There had been efforts to calm investors before the market opened.

The Federal Reserve early Monday said it was cutting its key federal funds rate a half percentage point to 3 percent, the lowest level in nine years. The nation's banks quickly cut their prime lending rate to 6 percent.

Scores of American companies also put out statements promising to buy back their own stock to prop up prices.

Meanwhile, a number of major investors, including Warren Buffett, said publicly that they would not be selling Monday. Internet bulletin boards carried appeals to investors to make "patriotic" purchases.

"Today's market is not important," NYSE chairman Richard Grasso said. "It's the market a year from now, two years from now."

Taking it in stride

Many investors didn't seem to be unnerved by the drop. Ronald Loftus, a broker in Springfield, Mass., said he was fielding phone calls from people who wanted to know what was going on, but he saw no panic selling.

"In fact, the reaction has been just the opposite," Loftus said. "Some people are looking to buy primarily out of patriotism and to show their support. They are saying it's something they can do."

Vanguard Funds received a lot of phone calls, but spokeswoman Rebecca Cohen said "we've had very few transaction requests, not even enough to establish a trend."

Before trading began, the NYSE observed two minutes of silence for the victims of the attacks in New York and Washington followed by the singing of "God Bless America."

The opening bell was rung by members of the police and fire departments along with representatives of other agencies involved in the rescue and recovery efforts nearby. Grasso called them heroes.

Despite concerns about traders making it to work, the NYSE was filled with its usual crowd.

"I thought that might be a concern," said Jay Mahoney of Wagner Stott Bear Specialists. "Over the weekend it seemed like a lot of people talked about being nervous. But everyone's here today."

The American Stock Exchange, forced out of its home due to damage, was operating out of a handful of posts clustered in one area of the NYSE, which was not damaged.

Still, there was some anxiety.

"You sit next to the window and keep thinking, am I going to turn around and see a plane coming," said Jeannette Rosario, who works in information technology for an exchange clearing house.

Most were proud to be part of the reopening.

"We did it," said Mike Mirabella of NYFIX, a company that provides technical support. "The market will come back up. It's just a matter of time."