Stock markets closed
Equity markets were only open on Monday this past week when prices were relatively stable after the previous Friday's sharp decline. Officials at the exchanges as well as from the Securities and Exchange Commission and the Federal Reserve had hoped to see markets open as soon as possible to protect liquidity, a critical factor for a market economy. With exchanges repairing communications systems and emergency workers clearing lower Manhattan, the exchanges hope to reopen on Monday.

The European markets reacted appropriately on Tuesday after the attack when exchanges across the continent plunged. Asian markets had already closed, but fell sharply the next day. On Wednesday, European markets stabilized somewhat. Most likely, the U.S. markets would have experienced something similar. In U.S., investors will have had more time to consider the ramifications of Tuesday's attack and subsequent impact on the economy in a more rational fashion. This is not to say that we won't see a sharp fall in equity prices when the market re-opens, but it is likely that companies that are more likely to feel the short-term pain such as travel & leisure industry, retailers, insurance companies will see the brunt of the impact. High tech and defense-related industries may actually see some recovery given the rebuilding that will be necessary.

Bond market rallies
Standard operating procedure suggests that investors flee to high quality securities in time of uncertainty, disaster, or war. The bond market was only briefly open on Tuesday and Treasury securities had already rallied. When the market reopened on Thursday, additional trading saw Treasury yields decline further and prices skyrocket. Treasury securities also benefited vis-à-vis corporate bonds since they have a lower degree of risk.

Though operational, the Treasury market suffered a heavy loss with Tuesday's attack on the Trade Center. The offices of Cantor Fitzgerald, a primary Treasury dealer, had their offices and about 1000 employees on the upper floor of one of the towers. The majority are still considered missing.