Stock Markets to Reopen Monday Amid Hopes of New Fed Cut

U.S. equities markets remained closed on Friday as Wall Street's workforce battled numbing sadness and uncertainty over the future to prepare for a Monday reopening.

The New York Stock Exchange, Nasdaq and American Stock Exchange assured investors that they would reopen for business at 9:30 a.m. EDT Monday  provided a slew of equipment tests over the weekend are successful.

But some investors wondered if such a resumption would be possible just six days after hijacked planes toppled the twin towers of the World Trade Center and left the financial district in a smoking ruin.

The Big Board's landmark building was cordoned off with the rest of lower Manhattan as rescue crews continued to dig through the wreckage. A plume of smoke emanating from the ruins of the financial district hung over the skyline shockingly void of the twin towers.

Thousands of people, including brokers, economists, strategists and their support staff, were missing in the rubble. Bomb scares racked the city on Thursday, triggering evacuations of financial firms such as J.P Morgan, Chase & Co. Inc. and Metlife Inc.

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

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 had 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.

Global Markets End Week on Sour Note

International markets offered some hope this week, but now many of them looked set to wrap up the week on a sour note. 

The pan-European FTSE Eurotop 300 index dropped 3.38 percent and the DJ Euro Stoxx 50 fell 3.55 percent on Friday, giving up initial gains tied to stronger insurance and technology shares. 

Slumping airline stocks like British Airways and Alitalia turned European markets lower in the fourth day of trading following the attack, as flights remained disrupted. 

The European markets plunged on Tuesday and then posted two straight days of gains. 

Asian stocks headed south on Friday as edgy investors dumped shares, fearing steep losses on Wall Street when U.S. markets resume. But Japanese stocks bucked the trend, jumping 4 percent as banks racked up gains after media reports raised hopes of speedier bad-loan disposals by Japanese banks.

Meanwhile U.S. Treasuries rose again on Friday, sending yields on two-year notes plunging to fresh record lows, as deepening economic gloom and Afghan Taliban warnings of revenge for any prospective U.S. attack heightened market uncertainty.

"The uncertainty in the markets, the weakness in equities, the rising chances of a global recession, plus the high likelihood that we will see rate cuts in the near term will push the market higher,'' 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." 

Rupert expects the Fed to cut rates before its Oct. 2 scheduled policy meeting.

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.

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, worried 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."

Analysts agree the four-day shutdown, the longest since the outbreak of World War I, has given investors time to overcome a panic that would surely have sent the stock market tumbling this past Tuesday. A handful of Wall Street gurus have even predicted higher stock prices on the opening with investors possibly staging a patriotic rally, but most are expecting a drop. 

"My own feeling is that there will be declines," Meckler said. "There are just too many companies, including financial companies here in New York, that should see material declines. The offset of that could be defense stocks and not much else."

But at the same time, experts who had initially predicted a gut-wrenching tumble in stocks once they open were tempering forecasts of gloom.

"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.

"The fact that it's 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.