Bush Speech Set to Underpin Wall St on Friday
September 21, 2001 12:02 AM ET
NEW YORK (Reuters) - The four-day nerve jangling slide in U.S. shares to three-year lows is likely to be checked at Wall Street's opening bell on Friday after President Bush's speech to Congress on last week's attacks was warmly-received.
"It was a powerful speech, beautifully delivered. I was surprised in a very positive way. If we're going to have a patriotic rally, it will be tomorrow," said Robert Stovall, senior market strategist at Prudential Securities.
The speech is likely to help the dollar and bonds too, though deep seated concerns about the economy remain, analysts said.
Bush reiterated demands that Afghanistan's ruling Taliban turn over to U.S. authorities all leaders of Osama bin Laden's militant group and close their training camps.
The evidence the United States has gathered all points to bin Laden's organization as responsible for the Sept. 11 attacks on New York and Washington and that by "aiding and abetting murder, the Taliban regime is committing murder," he said.
The attacks have triggered a 10 percent slide to three-year lows in U.S. shares since Wall Street reopened on Monday.
"He was supposed to deliver a knock-out punch and he did. I am hopeful this speech will attract some buyers, but I don't know," said Hugh Johnson, chief investment officer at First Albany Corp.
Prior to the speech, S&P 500 stock index and Nasdaq 100 index futures were flat, but were up several points by the time Bush gave his closing remarks.
"It should have a positive effect on the market tomorrow. It may be a while, through the end of the year, before things are finally resolved and the real challenge is to identify the terrorists," said Jack Shaugnessy, chief investment strategist at Advest.
Stocks on Thursday added to major losses that have lopped more than 1,200 points off the blue-chip Dow Jones industrial average this week, as corporate warnings of layoffs and worsening earnings after last week's terror attacks stoked fears of more damage to the U.S. economy.
The Dow Jones average dropped 382.92 points, or 4.37 percent, to 8,376.21. The Dow's point loss was among its 10 biggest in history.
The broader Standard & Poor's 500 Index slid 31.56 points, or 3.11 percent, to 984.54. The technology-laced Nasdaq Composite Index sank 56.87 points, or 3.72 percent, to 1,470.93.
"There is tremendous depression in the fund management industry. They see their portfolios losing money day after day. I feel like a psychologist most of the day," said Dominic Freud, a senior equities trader at S.G. Cowen in New York.
BIG FEARS REMAIN
"This is a good psychological boost. It was a good forceful speech. Bush did a fantastic job of reassuring America and the world that he is going to take a stand," said James Volk, co-director of institutional trading at D.A. Davidson & Co. in Portland, Oregon.
Volk said that the speech, however, may not have erased some of the stock market's major fears, including the timing and length of any possible military action, third quarter earnings, and huge amounts of job losses and the attack's impact on an already weak U.S. economy.
Others agreed.
"Usually, the markets abhor uncertainty and there's no real revolution in this speech. The possible military engagement looks open ended," said Chris Rupkey, vice president and senior financial economist at Bank of Tokyo-Mitsubishi.
Ana Johnson, senior managing director and head of research at Banc One Capital Markets, said Bush's speech left too many uncertainties in place and was intended to prepare people for military action.
"It was not about economic policy. The markets were a secondary audience," she said.
Friday's market will also have to contend with recent waves of mutual fund redemptions, margin calls, and expected unusually high volatility due to triple-witching.
DOLLAR GAINS, RATE CUTS HINTED
The Fed is widely expected to cut rates for the ninth time this year when it next meets on Oct. 2. The key fed funds rate, which influences borrowing costs across the U.S. economy, is now at 3.0 percent, its lowest level in more than seven years. Federal Reserve Bank of St. Louis President William Poole said late on Thursday interest rates could be reduced even further, even though they were already low.
"We have ample flexibility to move rates up or down as the situation demands," he told reporters following a speech.
In his speech on Thursday night, Poole called inflation "the dog that didn't bark" and said inflation was "low."
"That we take price stability almost for granted is a great strength of our current condition," he said.
The dollar regained 117.00 yen in Asian trade, with the Bank of Japan said to be intervening to buy dollars for the third time this week. The greenback had hit fresh seven-month lows against the Japanese currency in New York trade.
"The speech is probably enough to produce a bit of a dollar rally. It was definitely a plus. It helped Bush on the question of leadership and character," said John McCarthy, director of foreign exchange at ING Barings Capital Markets.
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