Markets Close Up Despite London Attacks
Thursday, July 7, 2005; 5:27 PM
U.S. investors stood their ground against the bombings in London today, defying warnings that financial markets are vulnerable to terrorist attacks.
Though stocks closed sharply lower in Europe after the bombings near London's financial district, Wall Street dug its way out of early losses and ended the day slightly higher.
The Dow Jones industrial average, which was off almost 100 points in the first hour of trading, closed up almost 32 points at 10,302.29. The Nasdaq Stock Market composite index gained 7 points to 2,075.66. The Standard & Poor's 500 stock index advanced 3 points to 1,197.87.
The immediate losses confirmed warnings that terrorism remains a threat to financial markets. But the recovery reinforced the argument that many investors have already factored terror into their decision-making --which limits the damage of events like today's bombing.
Bank of America's chief market strategist Joseph Quinlan, who has warned for some time that terrorism is a wildcard for the markets, hailed Wall Street's resilience. "The fairly quick stabilization in U.S. Equity prices . . . suggests the markets have largely priced in this type of risk and are taking a longer-term view," he said in a memo to clients. "Assuming there are no other near-term attacks, we would expect the markets to stabilize further."
Smith Barney strategist Tobia Levkovich said he interpreted the day's moves to mean that, "the U.S. stock market remains reactive to events that occur within its own borders, and is less sensitive to overseas events."
Looking back to 9/11, he said the market's behavior since then has shown that even the most atrocious terrorist attacks are only a temporary setback for the markets.
"This does not mean that investors are complacent," he said in an analysis distributed today, "but it does suggest that any impact most likely would be short-lived."
The blasts actually had a positive impact on petroleum markets. Prices fell based on the theory that the blasts will slow travel and tourism worldwide, reducing demand for oil and bringing down prices.