On the street where we live
All eyes are on the financial markets as the nation digs out and dusts itself off
Samuel Hamilton was thinking about building a deck and small pond in his backyard last Tuesday when he heard about the terrorist attacks in New York and Washington. All of a sudden, the 48-year-old Temple Terrace, Fla., resident said, he "just didn't want to talk about it anymore."
But as the nation struggles to return to normalcy, Hamilton says he is ready to move forward with his $7,000 project. Who knows, he may even buy a few blue-chip stocks when U.S. financial markets reopen. "It wasn't the bricks and mortar that they were aiming at," says the retired telecommunications engineer. "It was our spirit. I hope people get back to business."
The global economy, which was already on the brink of recession, prays that others share his sentiment. A Harris Interactive poll conducted after the Tuesday attacks found that only a minority of consumers, about 23 percent, planned to spend less money as a result of the terrorist acts. Only 1 percent of investors said they would sell stocks, emboldening Wall Street as it braces for what could be a volatile opening after having been closed for four straight trading days.
Given this unusually sustained cooling-off period--the longest unplanned trading hiatus since the Depression--the Street is holding out hope that the markets won't sell off dramatically this week as they have immediately following previous disasters. Overseas markets were mixed last week but not panicky. Major securities firms and companies have agreed to step in and prop up the market should stocks falter sharply.
But whether consumers back up their words with action depends crucially on two things: the price of oil and what happens next in the escalating war against terrorism. To most economists and financial experts, the immediate outlook is somber. "I'm afraid it's not going to be good," says Princeton economist Alan Blinder. "The hope is that it's not terribly bad."
Catastrophes of recent decades, if any guide, have had longer-term consequences for the U.S. economy only when they produced an oil price spike, as in the buildup to the 1991 Gulf War and the 1980 Iran hostage crisis, or fed into an already shaky economy. The second condition has clearly been met. A survey taken on the eve of the attacks showed consumer confidence sliding in the wake of dreary unemployment reports. Many shoppers already agreed with Lauren Ohlgren of Portland, Ore., that "the recession has been going on for a while and I've already been hit very hard." Ohlgren, shopping at a downtown mall on Thursday, apologized for her outing. "It's really the first time we've left the TV to do normal things."
Silver lining. The "CNN effect" that keeps families glued to their sets is the bane of U.S. retailers--and world markets. On the oil front, however, things are less threatening for the moment, though that could change rapidly if the Mideast is affected by U.S. retaliatory measures. The attacks provide "no reason for prices to change--except maybe on the downside," says oil expert Philip Verleger. "Cutbacks in U.S. aviation alone could save 300,000 barrels of oil a day."
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