Monday, September 24, 2001
The technological and human feat of opening the NYSE among the rubble and trauma of September 11 was a triumph. New York markets began trading with heavy volumes and catching up to do after being closed for four days. To ease the way, virtually all major central banks lowered their policymaking interest rates on Monday and Tuesday. The Fed led the way and lowered policy making federal funds 50 basis points to 3 percent. The European Central Bank and Bank of Canada followed, both lowering rates by 50 basis points also. The immediate reason for the actions was to shore up investor and consumer confidence, calm financial markets and spur growth after the worst terrorist attack ever inside the United States. However, investors were adrift in uncharted waters and it showed as trading was volatile and focused on the ramifications of future U.S. military action.
Although all equities indexes followed here fell during the week, the declines, albeit larger than normal, were orderly. This isn't the time to rush to judgment amid the emotional outpouring in the aftermath of September 11. Some companies rushed to cut employment and earnings forecasts based but many were headed that way prior to the disaster. Equities worldwide had been dropping at least since the week of August 24 and some - such as the Nikkei and Hang Seng - had been dropping for an even longer period of time. Markets hate uncertainty and they currently have to deal with an unusual amount given possible military action as well as the unknown resulting impact on the economy. However, a rush to judgment in the short term is imprudent. U.S. government officials including Fed Chairman Greenspan have emphasized the inherent strengths in the economy. Many economists are acknowledging that the economy, after teetering on the edge, could suffer a brief recession though it will likely rebound quickly.
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Not an ordinary week