Stock Markets to Reopen Monday Amid Hopes of New Fed Cut

U.S. equities markets will remain closed on Friday and reopen Monday, nearly a week after an attack destroyed the World Trade Center, exchange authorities said on Thursday.

Stock trading will resume at 9:30 a.m. EDT Monday, New York Stock Exchange Chairman Richard Grasso said at a meeting of top stock exchange and U.S. government officials. The six-day closing of the exchanges will be the longest shutdown in trading since the outbreak of World War I.

The exchanges will be testing the market on Saturday and the opening will be contingent on the results of those tests, Nasdaq executives also said.

Meanwhile U.S. Treasuries, trading for the first time since Tuesday's terror attack on the United States, surged in anticipation of a new Federal Reserve rate cut to fend off a potential recession.

Federal funds futures, which indicate where the markets think interest rates are heading, jumped to new contract highs.

"Right now there's no panic," said a trader at a primary dealer. "It's pretty quiet. There's no off-the-run trading at all because people are having trouble pricing stuff. We're making markets in everything.''

Talk that the Federal Reserve will cut interest rates by 50 basis points by early October or sooner aided short maturities, said Kim Rupert, senior economist at Standard & Poor's MMS. 

"I think that's a pretty fair bet," said the trader. "I think you can make a case for a 50-basis-point rate cut." 

The possibility of a coordinated rate cut by the world's central banks reinforced that scenario. On Thursday, the European Central Bank left its minimum bid rate unchanged at 4.25 percent but reconfirmed that it is ready to support normal functioning of markets and act if needed.

International financial markets were stable, with the pan-European Eurotop 300 blue-chip index shaking off its opening fall and gaining 0.82 percent, though the benchmark was still around late 1998 levels. The Euro Stoxx 50 index gained 0.83 percent.

Tokyo's main Nikkei average rose 91.09 points, or 0.95 percent, to 9,704.18 at the end of trading Friday morning. On Thursday, the Nikkei index rose 2.99 points, or 0.03 percent.

The dollar was little changed at $0.9062 to the euro and 1.6585 Swiss francs in sparse trade, unable to extend Wednesday's recovery as concerns remained about a possible global recession after the attacks. 

Material, Human Toll on Wall Street

The Big Board's landmark building, which is two blocks away from the mangled metal and smoking rubble that was once the Trade Center complex, was cordoned off with the rest of lower Manhattan. A plume of smoke emanating from the ruins of the financial district hung over the skyline shockingly void of the twin towers.

And thousands were still missing as rescue crews crawled over the wreckage of the collapsed Trade Center's two 110-story towers, where 40,000 people once worked.

Bond trading powerhouse Cantor Fitzgerald's offices, which held 1,000 employees, were on floors 101 and 103 through 105 in the north tower. In a tearful interview on ABC-TV, Cantor Fitzgerald Chief Executive Howard Lutnick said Thursday he was unaware of anyone who escaped from their World Trade Center offices.

Insurance company Marsh USA said only 1,000 of its 1,700 employees on floors 93 through 100 in the north tower were accounted for.

Merrill Lynch could not access its football field-sized trading floors in the World Financial Center, which also suffered significant damage.

Investment bank Morgan Stanley Dean Witter & Co., which occupied 25 floors in the complex, was only missing 15 employees out of 3,700 , a high-ranking executive said Thursday evening.

Switzerland's Credit Suisse Group and Germany's Commerzbank, Deutsche Bank AG and market data firm Thomson Financial, a unit of Thomson Corp., also have offices in the complex. 

Damage to the American Stock Exchange, located in a building not far from the World Trade Center, was so severe that parts of its operations might be temporarily relocated to the NYSE, which remains intact, or to other regional markets.

The local telephone provider, Verizon, said one of its five switching centers near the disaster site was out of service. Some 200,000 lines and 3 million data circuits, or private lines that normally serve business customers, were housed in the building.

Assessing Long-Term Damage 

Economists have raised grave concerns that the physical and psychological costs of the attack, especially on consumer sentiment, might tip the world's largest economy into recession.

"Some business is lost forever," said Mark Vitner, an economist at First Union Securities in Charlotte, N.C. "At this point, a lot of business and household decisions are being postponed. The longer it goes on, the deeper the problems for the economy."

Vitner said there's no question that reduced activity as a result of the attacks will cut economic growth in the short term, possibly driving it into the negative range for the third quarter.

Robert Brooks, a professor of financial management at the University of Alabama in Tuscaloosa, worries about long-term effects of the market closure. 

"The people who are making their living trading stocks are clearly not making any money right now," Brooks said. "But every day that it remains closed, there's more uncertainty in the marketplace and that can only lower the value of stocks and depress things further."

But at the same time, experts who had initially predicted a gut-wrenching tumble in stocks once they open were tempering forecasts of gloom as European markets managed to hold steady.

"A lot of the uncertainty about this is starting to dissipate — there is a light at the end of the tunnel for us,'' said Arthur Hogan, chief market analyst at brokerage Jefferies & Co. Hogan said. 

"The fact that is taking longer than people thought to reopen is better. We will get less of a panic. It will give us time to see how this financially affects us. I think it will be lot less emotional and more rational.''

Many analysts figure investors will have time to adjust to the crisis. The financial pros also cited the eventual benefit of the U.S. Federal Reserve's string of interest-rate cuts, which are expected to lift corporate profits by next year.

"I think the market was in a position where it was really oversold," said Woody Dorsey, a behavioral economist at research firm Market Semiotics, who bases his predictions on market psychology. "I think foreign markets gave you the harshest reaction and the shock of the trauma has occurred. I think the markets are going to rally near term." 

Reuters and the Associated Press contributed to this report.