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graphic

World looks to Wall St.

September 17, 2001 Posted: 1256 GMT

NEW YORK (CNNfn) -- A Federal Reserve interest rate cut provided only a marginal lift for Wall Street before trading began Monday as technology and airline stocks appeared poised for a selloff when markets resume activity following a 4-day shutdown due to last week's terrorist attack against the United States.

Among major technology issues, Microsoft (MSFT: Research, Estimates), Dell Computer (DELL: Research, Estimates), Cisco Systems (CSCO: Research, Estimates) and Oracle (ORCL: Research, Estimates) were down about 5 percent in before-hours trading. Northwest Airlines (NWAC: Research, Estimates) was 40 percent lower.

But to many crestfallen by the destruction of New York's World Trade Center and the damage done to the Pentagon, the opening symbolized more than just the everyday buying and selling that marks the equity markets. New York Stock Exchange Chairman Richard Grasso, interviewed on CNN, said "We'll send an important message to the terrorists – they've lost."

The Fed cut its target for short-term interest rates a half percentage point to 3 percent from 3.5 percent, its eighth cut of the year, in an effort to make money more accessible to consumers and avoid a recession.

Overseas markets sent a mixed signal. In Asia, major markets fell sharply, with Tokyo's Nikkei index ending 5 percent lower and Hong Kong's Hang Seng index losing 4 percent.

But European markets bounced off their earlier lows, offering some signs of support for U.S. markets. London's FTSE 100, Frankfurt's Xetra Dax and Paris' CAC 40 moved into positive territory as trading entered midday.

There was no stock futures trading, according to the exchanges where the contracts are normally traded. Electronic trading networks, a primary source of before-hours information, delayed trading in stocks at the behest of securities regulators.

Treasury prices were lower early Monday, with the yield on the benchmark 10-year note rising to 4.61 percent from 4.56 percent late Friday. The dollar fell against the euro and was flat versus the yen. Brent oil futures rose 7 cents to $29.50 a barrel in London.

Whatever happens once Wall Street reopens for business, Monday's opening will be like no other in the history of American stock markets. The markets were closed for four days, the longest such shutdown since the Great Depression. And the New York Stock Exchange will be trying to do business just blocks from the World Trade Center, destroyed in Tuesday's attack.

The markets have been closed since Monday because so many investors and traders were lost or injured in the attack, and because so much of the communications and utilities needed to trade stocks were damaged or destroyed.

But New York City itself, led by Mayor Rudolph Giuliani, has been determined to get business back to normal on Wall Street -- as though the ringing of the opening bell will be a blow against those who attacked the financial nerve center of the nation, and the world. Crews worked  through the weekend to make sure the facilities were able to function.

The let's-get-started sentiment is shared by the market community. "Time to dig in and start to go," said Hugh Johnson, chief investment officer at First Albany.

Johnson expects the stock markets to open sharply lower. "Just as the bond market and Europe has priced in what this tragedy means ... so too will the (U.S.) stock market," he said.

"There's a very good chance that the market will see some kind of a downward move, but of what magnitude, we're not prepared to say," said Brian Belski, market strategist with U.S. Bancorp Piper Jaffray.

Rally 'round the flag

But after the initial loss, some investors believe the markets could bounce back up. One wildcard is that many Americans, both prominent and not-so-prominent, have expressed the idea that buying stock Monday is a patriotic gesture and a symbol of defiance.

One of them is Vice President Richard Cheney. "I would hope the American people would, in effect, stick their thumb in the eye of the terrorists and say that they've got great confidence in the country, great confidence in our economy, and not let what's happened here in any way throw off their normal level of economic activity," he told NBC's "Meet the Press" Sunday.

Another is Warren Buffett, the renowned investor and chairman of holding company Berkshire Hathaway. He told CBS' "60 Minutes" that he will not be selling stocks Monday and that "If prices would fall significantly, there's some things I might buy."

Early Monday, Lehman Brothers raised the weighting of equities in its global portfolio to 70 percent from 60 percent, saying stocks are particularly undervalued.

Dow, Nasdaq near year's lows

The Dow Jones industrial average -- the world's most widely watched stock index and a gauge of the worth of the nation's biggest corporations -- begins trading at 9,605.51, about 500 points above its low for 2001. Concern that the U.S. economy is on the verge of recession has caused the Dow to decline 14 percent since hitting its highest level of the year in June.

The Nasdaq composite index, the once high-flying measure of technology stocks, starts at 1,695.38, less than half of the 3,835.23 at which it stood a year ago and only 56 points above its low for 2001.

The Standard & Poor's 500, the broadest major measure of U.S. stocks, is at 1,092.54, marginally above the three-year low hit earlier this month.

The two sectors expected to take the hardest hit at the opening are insurance and airlines. Claims from the attack have been estimated at as much as $20 billion, and insurers are expecting to bear the brunt of that in the quarter that ends this month.

As for the airlines, several of them -- including AMR's (AMR: Research, Estimates) American, UAL's (UAL: Research, Estimates) United and Delta Air Lines (DAL: Research, Estimates) -- already have announced service cutbacks and said they could face severe cash shortages because of the attack.

One Nasdaq-traded carrier, Northwest Airlines, fell about 40 percent to $11.90 in before-hours trading.

Several companies have taken steps to bolster confidence via stock buybacks. Among them were Starbucks (SBUX: Research, Estimates), network equipment maker Cisco Systems (CSCO: Research, Estimates), bank operator FleetBoston Financial (FBF: Research, Estimates)  and electronics parts maker Sanmina (SANM: