NEW YORK (CNNfn) - U.S. markets logged a fourth straight losing session Thursday as heavy selling continued across the board, precipitated by more corporate warnings and growing concerns over what direction the United States will take following the terrorist attacks of Sept. 11.|
The sustained selling has lopped at least 10 percent off all three major indexes this week and pushed the Nasdaq and the Standard & Poor's 500 index to their lowest levels in nearly three years.
"This is an extraordinary time for investors. Whenever there is a steep drop, the knee-jerk reaction from investors is to sell. And that often is the wrong decision. The best thing to do is to sit tight and wait for the dust to settle," said Henry Herrmann, president and chief investment officer of Waddell & Reed told CNNfn.
"On a long-term basis, this is a great time to buy. Stocks are on sale and investors should be adding to positions. But investors are reacting intuitively to the emotional aspect of what has happened," said Reed.
The three major indexes closed near session lows. The Dow Jones industrial average ended with another triple-digit loss of 382.92 points, or 4.3 percent, at 8376.21.
The Nasdaq lost 56.87 points, or 3.7 percent, to close at 1.470.93. The S&P 500 fell below 1,000, losing 31.56, or 3.1 percent, to close at 984.54.
More stocks fell than rose on heavy volume. On the New York Stock Exchange, declining stocks topped advancing ones by a more than 5-to-1 margin as 1.9 billion shares traded, the exchange's fourth heaviest trading day on record. Nasdaq losers beat winners by a than 3-to-1 edge as 2 billion shares changed hands.
Added to the mix was the fact that Friday is a "triple witching," the quarterly expiration of futures, index options, and individual stock options on same day. Many traders opt to close out of these positions ahead of the actual expiration day.
In other markets, the dollar fell sharply against the yen and strengthened versus the euro. U.S Treasurys moved lower, with 30-year bonds sliding for a fourth straight session.
Greenspan seeks to calm
Speaking to the Senate Banking Committee, Federal Reserve Chairman Alan Greenspan said the terrorist strike on New York and Washington will have a short-term impact on the economy, but won't dampen long-term prospects.
"But as we struggle to make sense of our profound loss and its immediate consequences for the economy, we must not lose sight of our longer-run prospects, which have not been significantly diminished by these terrible events," the Fed chairman said in his prepared testimony.
Greenspan also sought to reassure the senators and the nation that the U.S. banking system is running smoothly despite the problems caused by the attack.
In economic news, construction of new homes fell in August, as housing starts declined 6.9 percent to an annual rate of 1.53 million units last month, the government said.
Separately, the number of Americans filing for jobless claims fell last week. But the figures were influenced by last week's terrorist attack, which closed offices and disrupted travel.
But the job market is sure to weaken in coming weeks after Boeing and most of the major airlines announced thousands of layoffs in the wake of the attack.
Nervousness is also building in the investment community about the response the United States will make to the attack. Investors will be closely watching President Bush's address to Congress Thursday night.
"The economy, which had slowed down sharply before the World Trade Center attack, was not necessarily headed for a recession. After the attack, the probability of the U.S. entering a recession is far greater," said Alan Ackerman, market strategist with Fahnestock & Co.
Several more companies – including battery maker Rayovac and publisher Tribune Co. – joined the growing list of companies across sectors warnings about their bottom lines.
British Airways became the latest airline to announce job cuts during a week when U.S. air carriers have said they will pare tens of thousands of jobs.
"It will take some type of catalyst to turn this market. One can't be sure what that will be or when we will see it," said Ackerman. "Meanwhile, valuations are contracting significantly and my sense is that the market is reaching an oversold condition. Much of the market's rebound will have to do with clearing up some of the uncertainties."
Nearly all 30 stocks in the Dow industrials fell as investors remained concerned about the outlook for corporate profits in the next few months.
Among the losers was media conglomerate Walt Disney Co. (DIS: down $1.52 to $16.98, Research, Estimates), down as much as 15 percent at one point. The company said it has repurchased 50 million of its common shares at a discount via investment bank Goldman Sachs.
Other Dow components among the biggest losers were United Technologies (UTX: down $6.01 to $41.64, Research, Estimates), Honeywell (HON: down $2.99 to $23.59, Research, Estimates), and Eastman Kodak (EK: down $5.03 to $32.58, Research, Estimates), all of which recently have readied investors for shortfalls.
The airline sector, hard hit by insecurity about commercial flying due to the hijackings that were part of the attacks, continued to suffer.
British Airways (BAB: down $1.82 to $22.03, Research, Estimates) , Europe's biggest airline, joined most major U.S. carriers in announcing plans to slash 5,200 jobs in response to the decline in travel.
Another carrier, US Airways Group (U: down $1.20 to $4.45, Research, Estimates), was among the biggest losers on the New York Stock Exchange.
Also suffering as a result of the attack was the publishing sector after Tribune (TRB: down $3.28 to $32.40, Research, Estimates) and Knight Ridder (KRI: down $3.36 to $54.20, Research, Estimates) warned of earnings shortfalls resulting by a decline in advertising.
Battery maker Rayovac (ROV: down $2.95 to $13.30, Research, Estimates) warned that fourth-quarter results will be about half of what analysts expected.
Federal Express (FDX: up $0.12 to $34.95, Research, Estimates), whose delivery business came to a near standstill last week, said profit in its fiscal first quarter fell 29 percent from year-earlier figures.
Carnival (CCL: down $1.20 to $18.05, Research, Estimates), the cruise line, posted an increased profit in the last quarter, but added that reservations fell significantly following the terrorist attacks.