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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: High-Tech East who wrote (8846)	10/8/2001 5:29:10 PM
From: stockman_scott	Respond to of 19219

Fear Seen Limiting U.S. Economy Response Monday October 8 4:51 PM ET By Barbara Hagenbaugh WASHINGTON (Reuters) - U.S.-British attacks in Afghanistan (news - web sites) likely will provide a small boost to weakened U.S. consumer confidence (news - web sites), but fear of retaliation on U.S. soil will halt a major spike in sentiment, analysts said on Monday. Economists said the offensive that began on Sunday removes one layer of uncertainty -- the timing of the United States' response to the Sept. 11 attacks on the World Trade Center in New York and on the Pentagon (news - web sites) outside Washington. But with the air strikes in Afghanistan comes a heightened fear of retaliation, particularly since the prospect of violent attacks on the United States itself has been perceived as much more tangible ever since the attack of Sept. 11, which left some 5,600 dead. ``Is it really less uncertainty when...people keep telling us that they're going to attack us?'' asked Anthony Chan, chief economist at Banc One Investment Advisers in Columbus, Ohio. ''Everyone is in a state of uncertainty, and uncertainty is not good for consumer confidence, it's not good for consumer spending. But over time it gets better.'' Chan has analyzed the impact of U.S. wars on confidence, equity markets and on the economy as a whole dating back to the Spanish-American War in the late 1800s. He found that there is an initial drop in confidence and in equity prices as consumers and investors try to gauge what it all means, but then sentiment and stocks have historically bounced back. Stock prices were mixed on Monday as investors digested news of the attacks. The Dow Jones industrials average (^DJI - news) fell 51.83 points, or 0.57 percent, to 9,067.94, while the tech-heavy Nasdaq composite (^IXIC - news) edged up 0.65 of a point, or 0.04 percent, to 1,605.95. CONSUMER CONFIDENCE KEY Economists keep a sharp eye on confidence as consumer spending accounts for two-thirds of U.S. economic activity. With businesses sharply scaling back investments, analysts had credited consumers with keeping the weakened U.S. economy out of a recession prior to the attacks. But many analysts now feel a sharp rise in layoffs and a pullback in consumer spending, especially in the days following Sept. 11, has tipped the economy into a recession, commonly defined as two straight quarters of contraction. The University of Michigan said late last month its consumer sentiment index fell sharply in September to 81.8, its lowest level in nearly eight years, from 91.5 in August. The September reading was cut from a mid-month estimate of 83.6. The drop in sentiment between September and August was the largest one-month plunge since August 1990, when the Gulf crisis began. The survey showed that the second week after the attacks was when American attitudes suffered most sharply. ``The shock of September 11, by markedly raising the degree of uncertainty about the future, has the potential to result, for a time, in a pronounced disengagement from future commitments,'' Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) told lawmakers on Sept. 20. ``And that, in the short run, would imply a lessened current level of activity.'' LOTS OF STIMULUS IN PIPELINE In one of its most aggressive interest rate campaigns ever, the Fed has cut rates nine times this year to boost an economy that was ailing even before Sept. 11. After the ninth cut last week, the key fed funds rate, which influences borrowing costs throughout the economy, is now at 2.5 percent, its lowest level since 1962. The Fed has knocked a full percentage point off the fed funds rate since Sept. 17. Analysts note that the Fed cuts will undoubtedly provide a much-needed boost for the economy, working with a tax cut passed earlier this year and an economic stimulus package of tens of billions of dollars in further tax cuts and spending that is being crafted in Washington. ``There's a tremendous commitment and need that must be made I think with regard to investment in this country that could have extraordinary economic consequences in a positive way as we look to find ways to revitalize economy again,'' Senate Majority Leader Tom Daschle said in an interview on CNN. In its weekly economic commentary, Deutsche Bank Alex. Brown said fiscal stimulus for the next year will total close to 2 percent of U.S. Gross Domestic Product, an amount not seen in 40 years. ``I'm in the camp that thinks that with so much stimulus and more to come...the economy could bounce back very strongly,'' Schwab Washington Research Group managing director Greg Valliere said. ``I think that it really hinges on whether there is a second wave from the terrorists, whether there are attacks in the U.S. or in western Europe,'' he said. ``If there are, then I think they can have a really chilling effect on consumers,'' Valliere said. ``If the terrorists don't hit back I think that this (U.S.-British strikes in Afghanistan) could be a real positive here for the economy.''