Market Unshaken After Terrorist Threats

After tumbling on news of a static interest rate from the Federal Reserve Bank, markets began to recover on the day when news of a massive terrorist plot foiled in London dominated headlines, The Wall Street Journal reports.

"I am utterly shocked," said Stephen Sachs, director of trading at Rydex Investments in Rockville, Md. "There was a lot of chatter on the Street about the various terrorist events we have had, and that they have marked near-term lows for the market," he said.

Market watchers attributed the reaction--or lack thereof--to news that authorities had staved off an attack on aircrafts leaving Heathrow International Airport in London  as another example of  investors' hesitance to react unless there is actual imminent economic damage.

Although companies cited as targets of the attack, such as Continental Airlines and United Airlines' parent UAL, stumbled, other airlines, like Southwest and Airtran Holdings, actually rose. 

In fact, at its low point, the Dow Industrial Average dipped 31.46 points, but by close, it was up 0.44%, or 48.19 points.

Experts credit a 3.1% drop in oil futures as one cause of the upswing. Oil dropped to $74 per barrel on speculation of reduced air travel, and control in inflation indicated by the stabilization of the interest rate.

Strong quarterly profit reports from insurers, such as American International Group, also may have contributed to the bounce, experts said. 

And then there is the very fact the plot was stopped. Some say that it's a sign everything is working, so it's business as usual.

"The fundamentals are still good. The economy is still growing 2.5% to 3%," said Alfred Kugel, chief investment strategist at Atlantic Trust/Stein Roe in Chicago.

Still, he noted, "I find it very surprising that stocks are up. Oil prices are falling because of the terrorist situation in England," he said. "I don't see that as a good reason to rush out and buy stocks."

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.