Anthrax frightens investors
Several times this week key companies reported better-than-expected earnings. Normally this would have lifted stock prices. Unfortunately, investors were generally rattled by the reports of anthrax exposure in New York, Florida and the nation's capital. Economic news reports were not altogether unfriendly apart from the general malaise in manufacturing. Positive economic news and favorable earnings reports will probably help the market going forward, but to a smaller degree given the terrorist attacks and anthrax scare. Greenspan said this week that a cost - or risk premium - associated with terrorism should be reflected in stock prices, but this is likely to be smaller than the cold war risk premium.

Safe haven
These days, each time that the stock market takes a hit because of fears associated with terrorist attacks, investors appear to flock to the Treasury market. On the whole, yields on Treasuries are not all that different than they were a few weeks ago, but did decline modestly this week in line with stock market declines. Moreover, bond players are likely expecting further Fed rate cuts because of the weakness in industrial production. Safe haven + weak economy = declining bond yields.