NEW YORK -- The week Wall Street dreaded is finally over and it lived up to some of its worst fears.
How bad was it?
The Dow Jones industrials suffered their biggest point loss ever, 1,369, more than half again as much as the previous record.
The percentage loss was 14.3. That has been eclipsed only four times in market history, the last in 1940, when the Dow totaled 122 -- just over 1 percent of today's value.
Institutions sold and investors sat tight. The result: Wall Street had nowhere to go but down. And a turnaround is not in sight.
"It's such an old cliche about the lack of buyers, but it's probably true," said Kevin Connellan, director of equity trading at Northern Trust. "What's keeping people back is the uncertainty about what's to come. It makes people nervous."
Indeed, over the past week, $2.36 billion flowed out of the Standard & Poor's 500 index, in the form of trades bigger than 10,000 shares, according to Birinyi Associates. Mutual funds, pensions and other large institutions are generally the only investors able to make trades of that quantity.
By contrast, smaller investors appear to have been buying. Small trades -- those under 10,000 shares -- had a positive week: sending an estimated $986 million into the S&P 500, according to Birinyi.
That's not to say some investors weren't selling or that some institutions weren't buying. But, rather, that the buying so far has not been enough to bolster demand and -- subsequently -- stock prices in an already fragile market. That's because most investors, including the largest institutions whose million-dollar trades drive the market, are holding off on making any big buys until they have a better idea of what form and toll U.S. military action is going to take on the economy.
"We don't know when the war's going to begin, what form it's going to take and what the counterattacks are going to be," said Larry Wachtel, market analyst at Prudential Securities. "These institutions have fiduciary responsibilities. They have to adjust to the realities of the economy, they can't say it would be unpatriotic to sell and not sell.
"They have to do what they have to do to adjust to political and economic realities ... just as we have to live with what has happened."
And that's exactly what happened this week. The aviation and insurance sectors took big hits on concerns they are especially vulnerable to a downturn.
The aviation industry, which was already weak because of the sluggish economy, has announced nearly 100,000 planned job cuts because of the losses from the flying moratorium directly after hijacked planes crashed into the Pentagon and World Trade Centers -- as well as anticipation that the consumers may be reluctant to fly. Investors are also worried that insurance companies will struggle as they pay out billions of dollars in claims.
Financial services companies also were pummeled on fears that consumers will do less spending and borrowing in an economy on alert for war.
Instead, investors focused on precious metals, a favorite in uncertain times because of the idea they will hold their value no matter what. Gold-oriented mutual funds, for example, rose nearly 4 percent, while stock funds overall dropped an average of 10.3 percent, according to Lipper Research.
Analysts also said there was a great deal of mutual fund redemptions and margin calls by large institutions -- a demand that investors repay money borrowed to buy stocks earlier.
One of the most high-profile examples was the sale of 135 million shares of Disney stock by the Basses, a prominent Texas oil family. The Wall Street Journal reported Friday that the move was partly motivated by the need to pay off margin loans.
Some of the losses, however, might have also been due to events in the market not directly related to the terrorist attacks. Friday marked what is known as a triple witching session, the quarterly expiration of index futures and index and stock options. Historically, triple witching weeks are volatile as fund managers sell and buy stocks to put their portfolios in the best positions possible.
Although strong selling usually precedes a market turnaround, analysts are reluctant to forecast any end to Wall Street's current problems.
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