NEW YORK'The wobbly U.S. stock market regained some stability Tuesday following its steep selloff Monday, as escalating words of war and the growing prospect of recession buffeted investors in the aftermath of last week's terrorist attacks in New York City and Washington, D.C.
After an early surge, the Dow Jones industrials average of 30 blue-chip stocks dropped to end the day just 17.30 points lower at 8,903.40. The technology-heavy Nasdaq composite index fell 24.47 to 1555.08. The broad S&P 500 index declined 6.03 to 1032.74.
Meanwhile, a spokesperson for the Chicago Board Options Exchange said the exchange is investigating trading before the attack, but declined to elaborate about what stocks or traders are being probed.
In the days before the Sept. 11 attacks, unusually high numbers of 'put options''essentially, bets that a stock will drop'were purchased for shares of AMR Corp. and UAL Corp., the parent companies of American Airlines and United Airlines, which each had two planes hijacked, the Associated Press reported Tuesday, citing a check of option trading records. A put option is a contract that gives a holder the right to sell an asset at a specified price before a certain date. There was no similar pattern with other carriers, AP said. The shares of both companies plunged after the hijackings.
The markets activity unfolded against a backdrop of diplomatic sparring, with U.S. officials continuing to warn of a sustained military campaign and defiant leaders in Afghanistan, where the No. 1 suspect in the terrorist attacks is believed to be vowing a holy war.
'Let's face it, we're all jittery,' said Ed Yardeni, chief investment strategist at investment bank Deutsche Banc Alex Brown.
Central banks worldwide have been working to calm financial markets. A day after the Federal Reserve cut its target for overnight interest rates by half a percentage point, the Bank of Japan on Tuesday cut its discount rate to 0.10 percent from 0.25 percent, and the Bank of England cut its key interest rate by a quarter of a percentage point to 4.75 percent.
Analysts expect the Fed to lower its target further in coming weeks, a decision made easier by the Labor Department report Tuesday showing consumer inflation to be well contained.
U.S. lawmakers are also considering a multi-billion-dollar economic stimulus package and an emergency bailout for the ailing airline industry.
Some market watchers said the terrorists might not deserve all the blame for Monday's drop, when the Dow and Nasdaq both lost about 7 percent of their value. Before the attacks, U.S. retail sales were declining, unemployment was rising, consumer spending was fading, and stock prices were sliding amid a global economic slowdown.
'I'm not so sure, if you take the terrorist event out of this, there wouldn't have been enough fear last week just on the economic front' to produce similar market results, said Jim Paulsen, chief investment officer at Wells Capital Management, a San Francisco investment firm.
