NEW YORK (CNNfn) - While some analysts believe U.S. stocks could be set for a sharp selloff when markets reopen Monday, others say the longest trading halt since World War I could be beneficial to investors still shaken by this week's terrorist attack.|
Meanwhile, Treasury bond prices rose early Friday trading as investors remained convinced that the Federal Reserve will lower interest rates once U.S. stock markets reopen after the four-day pause caused by the terrorist attack.
Richard Grasso, chairman of the New York Stock Exchange, said Thursday he expects a full day of trading Monday, after being closed four days when terrorists slammed commercial airliners into New York's World Trade Center and the Pentagon near Washington, D.C. The attack destroyed the landmark twin towers at the heart of the world's financial center.
"The classic response is that you have pent up selling. People get nervous, uncertainty brings prices down as it normally does," Ron Hill, equity strategist with Brown Brothers, Harriman told CNNfn Friday . "We've already seen that in the European and Asian markets the first day as it dropped followed generally by a rebound." (WAV 350KB) (AIFF 350KB)
Several analysts are anticipating a selloff when the markets reopen, chiefly because of investor uncertainty over corporate profits and the economy's ability to stay out of recession following Tuesday's attacks.
"Events like this bring things to a halt and raise a level of shock that is difficult to describe," said Alan Ackerman, executive vice president of the New York brokerage Fahnestock & Co. "This is a huge catastrophe and it's one that has no parallel in history."
The hiatus has given investors time to absorb the news and consider their options.
One positive could be the Federal Reserve, which some analysts predict will impose a half a point interest rate cut as an economic stimulus once trading resumes. That would be the eighth interest rate cut this year.
Harvey Pitt, chairman of the U.S. Securities and Exchange Commission, addressed those concerns. "That should not cause anyone to believe there will be something sinister like a Black Monday opening," Pitt said.
But while some fear a selloff, others say the longer the delay, the longer people will have time to recover and become less apt to make rash trading decisions.
Investing professionals this week said they've been forced to come up with several different strategies to jump back into the market, depending on when the exchanges reopen. They said an early resumption of trading could have caused a lot more volatility and downward pressure. The delay until Monday will help calm fears and could even help stocks open flat or slightly higher.
"A delay allows people to have less psychology and more orderly behavior," said Donald Yacktman, manager of the $80 million Yacktman Fund.
Meanwhile, overseas stocks have rebounded following sharp declines in the immediate aftermath of Tuesday's tragedy. Japan's benchmark Nikkei index rallied Friday, jumping 4 percent to close above the 10,000 level after dropping nearly 10 percent earlier in the week.
European markets fell sharply Friday, after giving up early gains.