Stock prices continued a week-long free-fall yesterday as US Federal Reserve chairman Mr Alan Greenspan and other US economic policymakers sought to restore confidence with testimony to Congress that the economy was sound and would recover.
It was a miserable, rainy day on Wall Street with many bankers and investors absent to attend commemoration and funeral services. The security traders' group has 50 missing members.
The mood was no less sombre in the US Senate where a minute's silence was observed.
"Our economy - our prosperity - will not be destroyed," Mr Paul O'Neill, Treasury Secretary, said. He added, however: "We cannot say at this very preliminary stage exactly how these events will affect the economy."
Worried investors drove the Dow Jones industrial average down by 339 points by early afternoon. Since stock trading resumed on Monday after a four-day halt, the blue-chip index has plunged 12.25 per cent. The market ended down 382.92 points or 4.37 per cent at 8,376.21. The Nasdaq composite plunged 56.87 points, or 3.72 per cent, to 1,470.93, its lowest finish since October 1998, and the benchmark Standard & Poor's 500 index fell 31.56 points, or 3.11 per cent, to 984.54.
Mr Alan Greenspan, US Federal Reserve chairman, said the US economy "ground to a halt" after the catastrophe, which struck "at the roots of our free society", and that the economy would suffer disruptions for some time.
"The greater the degree of confidence in the state of future markets, the greater the level of long-term investment," he told the Senate Banking Committee sitting in emergency session in Washington. "That is why consumer and business fears about coming months and years will cause immediate economic weakness.
"The shock of September 11th, by markedly raising the degree of uncertainty about the future, has the potential to result, for a time, in pronounced disengagement from future commitments."
Since the attacks, economic activity had waned as consumers stayed riveted to their televisions and away from shopping malls, he said. "Indeed, much economic activity ground to a halt last week. But the foundations of our free society remain sound and I am confident that we will recover and prosper as we have in the past."
Whatever the desire to move rapidly, "it's far more important to be right than quick", Mr Greenspan added. "That does not mean that future actions are not going to be required." As the shock wears off in the weeks ahead, "we should be able to better gauge how the ongoing dynamics of these events are shaping the immediate economic outlook", he said.
"But as we struggle to make sense of our profound loss and its immediate consequences for the economy, we must not lose sight of our longer-run prospects, which have not been significantly diminished by these terrible events."
Mr O'Neill assured senators that the administration would have no difficulty in meeting its financing needs, despite the unknown toll from the attacks. The Federal Reserve has injected tens of billions of dollars into the banking system to ensure the markets keep functioning.
Recession, war fears send EU stocks to lowest since 1997: page 2; Attack on America - the Aftermath: pages 4 & 5
