Wall Street's Sensible Bad Day

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il the bell actually rang, the reopening of the New York Stock Exchange on Monday — after its longest blackout since the "bank holidays" of the Depression — was hailed by every official personage, from President George W. Bush to New York Mayor Rudy Giuliani to NYSE chief Richard Grasso, as a victory for the capitalists over the terrorists.

"They have lost," Grasso said before the bell. Then maybe you had to wonder. Investors lopped 600 points off the Dow and 100 off the NASDAQ in under an hour, rolling both indexes back to lows nobody ever wanted to see again and very nearly wiping that relentless smile off Grasso’s face in the middle of his 10 a.m. press conference.

INTERACTIVE GRAPHICS Map: Hunting Osama Map: Nukes Pipeline Interactive: Taliban P.O.W. Revolt More Graphics Tora Bora Nukes Pipeline Taliban Revolt Last Bastions Women & Islam No Refuge Taliban on the Run Afghan Caves Mood of the Nation Mazar-I-Sharif Terrorist Timeline Al-Qaeda Suspects Flu/Anthrax Sharing Secrets Al-Qaeda's World Ground War 11.4.01 Bush Team Grades Bioterror Threats War in Winter Workplace Safety Afghan Targets Anthrax Pathogen A Ground War An Uneasy Ally Targets Hit Search & Destroy Firepower & Food Frozen Assets Safety Guide Mideast Leaders Agents of Death Afghanistan Military Buildup Terrorist Cells Our Weapons Deadly Paths Twin Terrors   CNN.com Latest news: War Against Terror RECENT COVER STORY Closing In Dec. 24, 2001 Past Issues Taliban Last Days Dec. 17, 2001 ----------------- Lifting the Veil Dec. 3, 2001 ----------------- Hunt for bin Laden Nov. 26, 2001 ----------------- Thanksgiving 2001 Nov. 19, 2001 ----------------- Inside Al-Qaeda Nov. 12, 2001 ----------------- Defender In Chief Nov. 5, 2001 ----------------- Going In Oct. 29, 2001 ----------------- The Fear   Factor Oct. 22, 2001 ----------------- Facing   the Fury Oct. 15, 2001 ----------------- How Real   Is the Threat? Oct. 8, 2001 ----------------- Life on the   Home Front Oct. 1, 2001 ----------------- One Nation,   Indivisible Sept. 24, 2001 ----------------- Day of Infamy Sept. 14, 2001   PHOTO ESSAYS Kabul Unveiled Taliban on the Run More Photos >>> MORE STORIES Where's OBL: Letter from Tora Bora Anthrax: Where the Investigation Stands TIME/CNN POLL: Americans Standing By Bush's War More Stories >>>

It's not often that Wall Street sells off 6 percent on a morning that Alan Greenspan cuts interest rates by 50 basis points before the bell, the ECB follows suit, and the SEC, looking to make sure somebody has a reason to buy, loosens its controls on companies buying back their own stock. But as pipe dreams of a patriot’s rally quickly went up in smoke, it became clear before long that this wasn’t going to be a coward’s panic either. The losses stabilized by late morning and actually bounced a bit off their lows before slipping again in later afternoon and then bouncing again. The final tally: The Dow down 677 points, the NASDAQ down 115 — and it did seem as if the involuntary four-day layoff didn't hurt. The machinery worked, the connections connected, volume hit a record on the NYSE and it still wasn’t anything the hastily reconstructed infrastructure couldn’t handle. A promised halt to trading if the Dow dropped 1000 points did not materialize.

Rationality hits the markets

Tuesday’s attack on the twin flagstaffs of the free market was a catastrophe barely imaginable beforehand. For the most part, Monday’s reaction was a rational response — a sharp selloff in the very stocks that most folks expected.

Airlines sold off, along with aerospace manufacturers and anything to do with traveling and play — casinos, hotels, ski-resort owners, golf-club makers. Insurance companies sold off. Entertainment stocks sold off, as if the national mood would keep people away from the movies (that one may be temporary). And defense stocks and gold-mining companies had a pretty good day. Basically, it all made sense, and it could have been a lot worse, and in this uncharted territory it was an outcome that had a lot of people breathing big sighs of relief.

Moving forward

Now, this is just Day One, and we’re not talking about happy news. There is a sense among investors that something has definitely changed in the world, and not for the better. The peace dividend of the past decade — balanced budgets, tame long-term interest rates, sunny national mood — is buried under a million tons of steel, and for every cheer that may go up when George W. Bush makes his counterstrike there is a nagging fear, particularly in Europe, that if he doesn’t get Osama bin Laden he’s going to blow up a quarter of the world trying. A well-defined war can be good for business — a spiraling game of high-megaton whack-a-mole will not be.

And if Mr. and Mrs. Small Investor obeyed the wisdom of the day and stayed away so as to avoid being stampeded, they may not for long. And what was at least a Gray Monday could get blacker as the week goes on and selling begets pessimism and begets more selling. At the opening bell for Tuesday’s session it will only be a week since the financial world was blown up by some very determined men, and nobody knows yet how the globe, much less the global economy, will be affected.

Sometimes, rational can be bad for business, too.