Market Plunge: Will Wall Street choke recovery? If meltdown continues, all bets are off
ARE THE MARKETS HEADED FOR A CRASH? - Newsweek
Foreign Investors Losing Faith - Overseas Capital Is Fleeing The U.S. Markets
Market Plunge: Will Wall Street choke recovery? If meltdown continues, all bets are off
ARE THE MARKETS HEADED FOR A CRASH? - Newsweek
Foreign Investors Losing Faith - Overseas Capital Is Fleeing The U.S. Markets
NYSE's Grasso: Monday May Be Rough Day
Reuters
By Caren Bohan
July 21, 2002 04:24 PM ET
Source
WASHINGTON (Reuters) - The head of the New York Stock Exchange warned on Sunday that Wall Street may face a rough ride when stock markets open this week but urged investors to stay calm and focus on the wisdom of long-term investing.
"Mondays following Friday declines have always been difficult and I suspect tomorrow will be no different," Richard Grasso, chairman of the world's No. 1 exchange, told NBC's Meet the Press.
On Friday, the Dow Jones industrial average sank to 1998 lows when it crumbled 390 points, or 4.6 percent, to 8019.
In a bear market, stocks can be especially vulnerable on Mondays because the market closure over the weekend allows time for investor anxieties to build.
The October 1987 market crash, when the Dow plunged 508 points or 22 percent, occurred on "Black Monday" -- which followed a 108-point-drop the previous Friday.
A slew of corporate accounting scandals have left investors mistrustful, prompting them to dump equities.
The Securities and Exchange Commission has ordered leaders of U.S. companies to vouch for the honesty of recent financial reports, giving them until Aug. 14 to do so. The SEC named the top 945 publicly traded firms whose books must be certified as accurate by chief executive and financial officers.
The Aug. 14 deadline is also looming over the marketplace. And after the scandals at Enron, WorldCom and other companies, investors are worried about what new bombshells might drop when executives put a stamp of approval on their company's results.
But Grasso played down such concerns.
"I'd be very surprised, if any of the major companies ... would, in essence, renege on their previously reported financial statements," he said.
Over the past two weeks, the Dow has lost 14 percent of its value, falling in every session but one. Other market gauges have hit multiyear lows as well.
KEY THRESHOLD
With the Dow perched just above the psychological threshold of 8,000, Grasso made a plea for investors to keep a cool head and think about long-term goals like saving for retirement or their children's college education.
"Please be patient," he prodded. "Please don't do something that emotionally feels good but in the long term will be a mistake."
He noted that over the long haul stocks outperform fixed-income assets. Grasso also highlighted statistics showing that despite the stock market's woes, the U.S. economy remains in a recovery mode after last year's recession.
"Our economy is strong. We've seen first-quarter (gross domestic product) grow at a rate of 6 percent. Inflation is nonexistent. Interest rates are the lowest they've been in 30 years," Grasso said.
Economist Allen Sinai of Decision Economics agreed the economy has held up so far but two of its key pillars, consumer spending and the housing market, may be vulnerable because of the beating the stock market is taking.
The stocks' declines threaten to undermine confidence and could lead consumers to shut their wallets.
Speaking on the CBS program "Face the Nation," Sinai also said he saw a chance of a temporary reprieve from stocks selling but they may lose even more ground.
"We still have significant downside risk to our equity markets, even from these levels, I'm sorry to report another 8 or 10 percent possibly down before we could bottom out and then move up," he said.
Goldman Sachs strategist Abby Joseph Cohen was more optimistic, saying stocks have absorbed much of the bad news.
"I can't give advice to all of the different investors out there, but would I say that I think that stock prices are today priced too cheaply," Cohen told "Face the Nation."
In several public appearances recently, President Bush has also emphasized some recently positive economic signs in an effort to shore up investor confidence.
But that has not stemmed the stocks' slide. Even Federal Reserve Chairman Alan Greenspan was only able to bring about a momentary pause in the sell-off when he testified on Capitol Hill last week, saying the corporate accounting mess had not shaken the core foundations of the U.S. economy.
Grasso said efforts by Washington and within the private sector to reform the financial system would eventually renew investors' faith but that would take time.
The New York Stock Exchange chairman urged tough measures to crack down on corporate managers who commit fraud, saying the country needs to "wage a war against terrorism in the boardroom, against misleading investors."
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