Military

DATE=11-5-01

TYPE=BACKGROUND REPORT

TITLE=TERRORISM AND STOCKS

NUMBER=5-50441

BYLINE=ELAINE JOHANSON

DATELINE=NEW YORK

VOICED AT:

INTRO: Terrorism and the uncertainty about who or what gets hit next have affected the United States in an unprecedented way, following the events of September 11th. Analysts say even the business of Wall Street is different. V-O-A correspondent Elaine Johanson reports from New York:

TEXT: Historically, the U-S stock market has reacted to scheduled events. In the Vietnam era, it was casualty counts, which were regularly timed releases. In the 1970s, it was the money supply. In the 1980s, traders on Wall Street say they waited for critical data on trade with Japan.

Today, Wall Street is tuned to news related to terrorism the bombing of targets in Afghanistan, the hunt for Osama bin Laden and the persistent trickle of anthrax cases in the United States. The difference now, however, is the immediacy of communication. Michael Balog, an analyst with Banc of America Securities, says traders are watching live coverage of frightening events:

///BALOG ACT///

What's interesting about this, and this is sort of a new twist, is that news is real-time and the events are real-time. You never know when you're going to get a piece of good news or bad news. But the market certainly expects a lot of bad news every day and watches for it with bated breath.

///END ACT///

Patrick Boyle from the Credit Suisse First Boston brokerage says this is the most difficult market he has ever encountered in his decade of professional stock trading:

///BOYLE ACT///

It's such a day to day trading event. Every day is different. And as much as you'd like to come in and buy the market all week long, you're on your heels (off balance) and you're just watching and listening to all the information that comes across the desk. You just don't know what's going to come across the T-V.

///END ACT///

The financial markets have never taken well to uncertainty of any kind. But Wall Street experts say September 11th added a new dimension to the unknown. With officials in Washington talking about a war on terrorism that could last a long time, investors may have to get used to living with uncertainty defined by a lot more than the ups and downs of the U-S economy.

Some investors have abandoned the markets, moving their money to the sidelines for now. But many are hanging in for the long-term, shifting nervously from one sector to another. Analyst Michael Baylog says choosing safe stocks today is a big debate, and the correct choice is anybody's guess:

///BAYLOG ACT///

Household products, on one hand, are safer and more defensive. On the other hand, the technology stocks, if you're making the bet that things are going to get better, and like night follows day, the lowering of fed rates (interest rates) is going to yield a better economy out there. But as one trader said to me, I don't know what's going to happen.

///END ACT///

The U-S central bank's policy this year of easing credit and the anticipation of an economic stimulus package from Washington have raised hopes for a turnaround in the U-S economy. But just when that will happen again falls into the category of the unknown. Experts say next year. But they are divided on exactly when next year. Too many opinions, too many different predictions, are shadowing the business of Wall Street. (signed)

NEB/EJ/MAR