Military

DATE=10/2/01

TYPE=CORRESPONDENT REPORT

TITLE=WALL STREET WRAP (L AND S)

NUMBER=2-281279

BYLINE=ELAINE JOHANSON

DATELINE=NEW YORK

CONTENT=

VOICED AT:

INTRO: U-S stock prices moved modestly higher Tuesday, as the U-S central bank cut short-term interest rates for the ninth time this year to their lowest level in nearly 40 years. V-O-A correspondent Elaine Johanson reports from New York:

TEXT: The Dow Jones Industrial Average went up 113 points, more than one percent, to eight-thousand-950. The broader Standard and Poor's 500 index climbed 12 points, one percent. The tech-weighted Nasdaq composite closed about three-quarters of a percent higher.

The rate cut was anticipated and welcome on Wall Street. The hope is that lower borrowing costs eventually will help turn the U-S economy around. But the financial markets these days are dealing more with short-term reality, with A U-S economy that was already fragile before the events of September 11th. Almost no one sees any huge market moves to the upside any time soon.

Analysts say investor attitudes have changed, and have been changing all year, in response mostly to a bleak corporate earnings outlook. On Tuesday, investors showed once again a streak of caution, as they deal with a lot of economic uncertainty.

///REST OPT///

Economist Lyle Gramley says people seem to be pulling out of the shock that followed the September 11th terrorist attacks. He believes consumer activity, while somewhat diminished perhaps, will put the economy back on track sometime next year:

///GRAMLEY ACT///

I think there are some signs beginning to develop now where the public is returning to something more like normal behavior. Airline flights are filling up a bit. We're seeing more people go to movies last week than the week before. The shopping malls are filling up. If this continues, we'll get back to a more normal kind of behavior, certainly not to what we had before September 11th, but more nearly normal

economic behavior.

///END ACT///

However, most analysts, including Mr. Gramley, concede recovery of the economy and the stock markets depends a lot on what happens in the war on terrorism. Byron Wien, an investment strategist with Morgan Stanley:

///WIEN ACT///

You know, what you don't know is what the next event is going to be, if there's going to be another terrorist event. And you don't know the nature of our retaliation. So those are two big uncertainties. And the fact that they are there raises the risk premium for equities.

///END ACT///

Experts note the U-S central bank, in announcing the interest rate cut,

acknowledged the possibility of continuing economic weakness for a while. It said the September 11th attacks heightened the degree of uncertainty. (signed)

NEB/NYC/EJ/RH