Wall Street's losses widened today -- its third steep decline in four sessions -- as Federal Reserve Chairman Alan Greenspan confirmed what Wall Street already knew and feared: Last week's terrorist attacks have produced a significant drop in economic activity.
The Dow Jones industrials fell more than 250 points by midday, bringing their losses so far this week to more than 1,100 points.
At 1 p.m., the Dow Jones industrials were down 318.15 to 8,440.98. The Nasdaq composite index dropped 51.70 to 1,476.10, while the S&P 500 index was off 28.72 at 987.38.
The selling was expected after a turbulent session Wednesday, when the Dow Jones industrial average fell more than 400 points but recovered to a loss of 144. But the market's anxiety increased today as Greenspan told Congress the terrorist attacks had disrupted the business activity in a number of ways, including a drop in consumer spending and travel and the stock market's four-day shutdown last week.
But the Fed chairman also said, "I am confident that we will recover and prosper as we have in the past."
The market will remain vulnerable as companies announce layoffs and profit warnings linked to the Sept. 11 attacks.
Signs of economic fallout have already surfaced as all U.S. airlines have reduced their flight schedules and some have cut thousands of jobs, and as insurance companies have warned that massive payouts will hamper the industry for quite a while.
Likewise, financial companies have warned that they will suffer as consumers and investors spend, borrow and invest less money. Retailers and those in the entertainment industry also expect a drop in business.
S&P this morning cut its ratings on nine U.S. air carriers, including United, American and Delta Air Lines Inc. Moody's cut its ratings on Northwest Air Lines Corp. and Alaska Air Group Wednesday after exchanges closed.
UAL fell 3 cents to $18.73 and AMR dropped 25 cents to $20.25. Northwest declined 31 cents to $11.76, and Alaska lost 54 cents to $20.66, while Delta slid 6 cents to $23.75.
Standard & Poor's lowered its rating for Royal Caribbean Cruises Ltd., the No. 2 cruise company, which fell 82 cents to $10.34. Rival Carnival Corp. lost $1.05 to $18.20.
Boeing declined 57 cents to $32.04. The biggest aircraft maker said Tuesday it will fire as many as 30,000 workers because it expects the airline crisis to clobber demand for new aircraft.
American International Group Inc. shed $1.40 to $68.10. Munich Re and Swiss Reinsurance Co., the largest reinsurers, boosted estimates for claims from the attacks by more than $1.6 billion.
General Electric Co., whose businesses include jet engines, aircraft leasing and insurance, dropped $1.30 to $31.20 and has declined 21 percent this week.
Microsoft fell $1.54 to $52.33, Cisco Systems declined 28 cents to $13.21, and Intel lost 87 cents to $21.41.
Steep declines this week might set the market up for a rally, after all investors who want out of stocks get out, some investors and strategists said.
"I think we're getting very close to some kind of a selling climax," Barton Biggs, chief investment strategist at Morgan Stanley Dean Witter & Co., told Bloomberg Television. "That will present a major opportunity for a rally."
Biggs said the market might decline a further 5 to 10 percent before bottoming.
Boeing, which has announced it will cut as many as 30,000 jobs, fell $2.12 to $30.49.
Insurer American International Group, which said last week it expects its pretax losses from the attack to total $500 million, declined 80 cents to $68.70. Banker Citigroup fell $1.22 to $37.23, while brokerage house Merrill Lynch tumbled $1.40 to $37.10.
Retailer Target was down $1.27 at $26.99, while cruise ship company Carnival was off 99 cents at $18.26.
The market will remain vulnerable to layoff announcements, earnings warnings and economic data as well as any political news.
"There's a lot of uncertainty right now and that's why the market is weak," said Jim Weiss, chief investment officer for equities at State Street Research. "We just don't know a whole lot about many things right now and it may stay that way for a while."