Stocks plunge again to nearly 3-year low

NEW YORK -- Stocks fell sharply Thursday for the third time in four sessions, with the Dow closing at a nearly three-year low amid fears of severe economic repercussions from last week's terrorist attacks.

The Dow Jones industrial average fell 382 points, bringing its loss this week to 1,229 points or nearly 13 percent and putting the index in line for its biggest one-week point drop.

"It's rollercoastering down," said Matt Brown, head of equity management at Wilmington Trust.

Selling expected

The selling was expected after a turbulent session Wednesday, when the Dow fell more than 400 points but recovered to a loss of 144. But the market's anxiety increased Thursday as Federal Reserve Chairman Alan Greenspan told Congress the attacks had disrupted the business activity in a number of ways, including a drop in consumer spending and travel and the stock market's four-day shutdown last week.

But the Fed chairman also said, "I am confident that we will recover and prosper as we have in the past."

The Dow fell 382.92, or 4.4 percent, at 8,376.21. The blue chips last closed below 8,400 in October 1998. Unless the blue chips rally substantially Friday, they are likely to have their biggest one-week point drop, eclipsing the 821.21 they fell in the week ending March 16.

The broader market was also down, with the Nasdaq composite index falling 56.87, or 3.7 percent, to 1,470.93 and the Standard & Poor's 500 index off 31.56, or 3.1 percent, at 984.54.

This is the first time the S&P 500, considered the market's best indicator, has closed below 1,000 since October 1998.

"The economy was in bad shape before this event, and this event just magnified everything by thousands," said Gary Kaltbaum, market technician for Investors' Edge Partners, of last week's terrorist attacks.

Uncertainty weighed heavy on Wall Street, where analysts and investors wondered just how much and for how long the economy will suffer as a result of the Sept. 11 attacks, and anxiously awaited to see how the Bush administration will retaliate.

"We just don't know the answers," said Ricky Harrington, a technical analyst for Wachovia Securities.

The market is expected to remain quite vulnerable as companies announce layoffs and profit warnings linked to the attacks in which hijacked airliners leveled the World Trade Center and destroyed part of the Pentagon.

Economic fallout

Signs of economic fallout have already surfaced as all U.S. airlines have reduced their flight schedules and some have cut thousands of jobs, and as insurance companies have warned that massive payouts will hamper the industry for quite a while.

Likewise, financial companies have warned that they will suffer as consumers and investors spend, borrow and invest less. Retailers and those in the entertainment industry also expect a drop in business.

In keeping with investors' fears that practically all businesses will be hurt, Thursday's selling was again spread across an array of sectors.

Boeing, which has announced it will cut as many as 30,000 jobs, fell $2.85 to $29.76. Implementing the first of its 12,000 layoffs Thursday, Continental Airlines dropped $3.51 to $13.95.

Insurer American International Group, which said last week it expects its pretax losses from the attack to total $500 million, fell 60 cents to $68.90. Banker Citigroup declined $2.09 to $36.36, while brokerage house Merrill Lynch fell $2.49 to $36.01.

The retailer Target fell $1.36 to $26.90, while cruise ship operator Carnival slipped $1.20 at $18.05.

The market will remain vulnerable to layoff announcements, earnings warnings and economic data as well as any political news.

"There's a lot of uncertainty right now and that's why the market is weak," said Jim Weiss, chief investment officer for equities at State Street Research. "We just don't know a whole lot about many things right now, and it may stay that way for a while."

Analysts said some technical factors are also at work. They said investors might be receiving margin calls -- a demand that they repay money borrowed to buy stocks earlier. Another factor is the expiration of stock index futures, stock index options and stock options Friday, a quarterly occurrence called triple witching, which can prompt heavy selling.

Overseas markets also fell Thursday. Japan's Nikkei stock average closed with a loss of 1.6 percent. France's CAC-40 ended down 3.9 percent, and Britain's FT-SE 100 fell 3.5 percent. Germany's DAX index was down 5.7 percent.