Area analysts not surprised by market behavior
Stocks of airlines and travel-related companies fell while defense and telecommunications firms fared well Monday, punctuating the biggest one-day point drop in the history of the Dow Jones industrial average.
The decline was no surprise to South Shore financial consultants, who predicted the markets’ reaction to last Tuesday’s terrorist attack long before the opening bell.
“It’s going to take a long time for the airline industry to recover,” said Cheryl Sillings of Brookstreet Securities Corp.
Shares of AMR Corp., American Airlines’ parent company, plummeted 39 percent to $18 a share, and UAL Corp., United’s parent, dropped 40 percent to $18.16. Both carriers, trading on the New York Stock Exchange, lost two of its planes with crew and passengers in the deadly catastrophe last Tuesday.
Sillings’ telephone was ringing off the hook Monday as investors looked for advice. She had also predicted hotel companies would take a hit in what she described as an “ugly day.”
Marriott International fell $8.60 to $32.25. Casino giants Harrah’s and Park Place Entertainment, parent to Caesars Tahoe, posted losses of 14 percent and 19 percent respectively.
But it wasn’t all gloom and doom. American Skiing Co., which operates Heavenly Ski Resort, dipped only slightly. Telecommunications firms like Verizon and Pacific Bell’s parent company, SBC, fared well.
“As far as we’re going down, we’re going to bounce back,” Sillings said. “This is not going to last. People want to get back to normal.”
Some investors are driven by their patriotism, Edward Jones financial consultant Greg Herback said. Like Sillings’ clients, many other investors simply wanted to buy up the bargains.
“Most of my clients are staying the course over the long haul. Some wanted to show their patriotism by buying American and United” airlines, he said.
But Americans should prepare for an economic downturn as recession appears inevitable, said Tom Cargill, University of Nevada, Reno, economics professor.
“The economy was already in or heading into recession,” Cargill said. “Consumer confidence and the markets almost assuredly will see a slow down in business investment and consumer spending,” he said. Cargill said he’d be surprised if he didn’t see more 200- to 300-point drops in the coming weeks.
“Remember, the financial markets react to the uncertainty. This is the first time people have realized their lives could be in danger” from domestic terrorism, he said.
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