Not even encouraging words from U.S. Federal Reserve Chairman Alan Greenspan could bolster U.S. markets Thursday as the Dow Industrial Average and the Nasdaq continued to fall amid fears that last week's terrorist attacks on the U.S. pushed world markets even closer to a global recession.
Greenspan told the Senate Banking Committee Thursday morning that he had confidence in the U.S. economy's strength in the long-term. But his remark that last week's attacks have "raised the degree of uncertainty about the future" did not sit well with investors, who embarked on a selling frenzy after the Fed chief's address.
"The bottom line from the Fed's comments is -- don't expect a quick turnaround," said Scott Wren, an equity strategist with investment bank A.G. Edwards & Sons Inc. While he said he didn't expect the Fed to play too heavily into the market's performance Thursday, the leading indexes did reflect long-term investor fears.
The Dow Jones Industrial Average plummeted 381.12 points, or 4.35 percent, to 8,378.01 at the close of the day, while the Nasdaq dropped 56.87 points, or 3.72 percent to 1,470.93. The Dow already posted its largest one-day point loss Monday when it dove 684.81 points, or 7.12 percent, after being closed for four days following the terrorist attacks.
Hardware and software vendors alike took a beating through midday Thursday, as investors predicted that lower corporate profits would curb sales. Dell Computer Corp. (DELL) tumbled 8.4 percent to US$17.48, Compaq Computer Corp. (CPQ) fell 3.44 percent to $7.85, Intel Corp. (INTC) slid 7.23 percent to $20.67 and IBM Corp. (IBM) traded down 2.71 percent to $93.40.
Meanwhile, AOL Time Warner Inc. (AOL) dropped 5.49 percent to $29.25 and Microsoft Corp. (MSFT) slipped 5.77 percent to $50.76, while PeopleSoft Inc. (PSFT) fell 3.62 percent to $19.99 and Siebel Systems Inc. (SEBL) slumped 6.73 percent to $14. Networking giant Cisco Systems Inc. (CSCO) tumbled 4.52 percent to $12.88 and Sun Microsystems Inc. was roped into the broad market decline, falling 6.92 percent to $8.47.
Meanwhile, biometrics firms, which were given a boost at the beginning of the week as investors foresaw heightened demand for their products amid a national call for increased security, continued to rally Thursday.
Visionics Corp. (VSNX), a maker of face and retina scanning technologies, jumped 7.44 percent to $8.81. Digital identification systems maker Viisage Technology Inc. (VISG) rocketed 22.88 percent to $4.35, while Saflink Corp. (ESAF.OB), a maker of systems that analyze voice, facial features and fingerprints, leapt 105.56 percent to $0.37.
Security technology companies have garnered a similar response from investors. Airport security technology maker InVision Technologies Inc. (INVN) gained 11.71 percent Thursday to close at $7.92. Another maker of airport W-ray devices, American Science and Engineering Inc., gained 10.73 percent to end the day at $11.35.
"We would say that the rush into the security stocks is a little early," Wren said. "We're taking the macro view of the underlying economy. Our time frame before we expect to see any positive effects of increased spending on this kind of technology is 9 to 12 months.
"There's a very high probability that a year from now you're going to have a hell of a lot better economy and a lot higher market," he added.
Still, U.S. markets overall continued to slide, as did many of their foreign counterparts.
Most European markets were down Thursday, as feared economic repercussions from the U.S. attacks rippled around the globe. Their drops were accelerated by more bad news from the airline industry, which is suffering serious revenue losses from a sharp decline in travel since the attacks. News that Europe's largest carrier, British Airways PLC, plans to cut 7,000 jobs and reduce its flight schedule by 10 percent sparked heavy selling.
The London FTSE 100 index dropped 44.6 points, or 0.91 percent to close at 4,854.3, while the Frankfurt DAX 30 index also slumped, falling 44.29 points, or 1.05 percent, to 4,190.26. The Paris CAC 40 index slid 53.87 points, or 1.34 percent to 3,961.59, while the Amsterdam AEX 25 index managed to close up 0.46 points, or 0.1 percent to 440.52.
Although news late Wednesday that the U.S. was deploying aircraft to the Middle East caused markets to rally, helping them recover from their morning lows, recession jitters and profit warnings continued to take a toll on the markets.
The Dow Jones Industrial Average closed down 144.27 points, or 1.62 percent Wednesday to 8,759.13. The Nasdaq ended yesterday with a 27.43 point-loss, down 1.75 percent to 1,527.65.
Thursday's close marked four straight days of heavy losses for U.S. markets, after they were shut down for four days last week following terrorist attacks on the World Trade Center in New York and the Pentagon outside Washington D.C.
With the markets still experiencing high volatility from the uncertainty caused by last Tuesday's attacks, investors looked for guidance Thursday from Greenspan, who met with the Senate Banking Committee at 10 a.m. ET. Investor trading after his address to the committee indicated that the market was looking for a short-term fix, and failed to find that from the Fed chairman. Investors now are left to await President George W. Bush's scheduled address to a joint session of Congress Thursday evening on the U.S. response to the attacks, in their search for clues on where the markets are headed.