NEW YORK – Stocks suffered their third steep decline in four sessions Thursday as mounting layoffs and weakening corporate profits after last week's terrorist attacks kept buyers on the sidelines.
Wall Street's losses widened as Federal Reserve Chairman Alan Greenspan acknowledged that the attacks produced a significant drop in economic activity.
But the Fed chairman also said, "I am confident that we will recover and prosper as we have in the past."
The Dow Jones industrial average tumbled 382.92 points, or 4.37 percent, to end at 8,376.21, the seventh largest point drop ever. It was the lowest close for the Dow since October 1998. So far this week, the Dow has lost more than 1,200 points.
The Nasdaq composite plunged 56.87 points, or 3.72 percent, to 1,470.93, its lowest finish also since October 1998, and the benchmark Standard & Poor's 500 index fell 31.56 points, or 3.11 percent, to 984.54 — closing below the key 1,000-point level.
"Anyone who bought yesterday looks like a moron today. And if you buy today, you're worried you're going to be looking like a moron tomorrow," said Dominic Freud, head of European trading at S.G. Cowen in New York. "The likelihood of looking like an idiot next week is quite high."
The selling was expected after a turbulent session Wednesday, when the Dow Jones industrial average fell more than 400 points but recovered to a loss of 144. But the market's anxiety increased Thursday.
"What we're seeing here is a continued uncertainty in the market, lack of institutional buying," said Uri Landesman, chief investment officer with AFA Management Partners. "And so people are just waiting and seeing what happens here; What the [U.S.] response is going to be like? Are there going to be any more terrorist attacks?"
Signs of economic fallout have already surfaced as all U.S. airlines have reduced their flight schedules and some have cut thousands of jobs, and as insurance companies have warned that massive payouts will hamper the industry for quite a while.
Likewise, financial companies have warned that they will suffer as consumers and investors spend, borrow and invest less. Retailers and those in the entertainment industry also expect a drop in business.
In keeping with investors' fears that practically all businesses will be hurt, Thursday's selling was again spread across an array of sectors.
Boeing, which has announced it will cut as many as 30,000 jobs, fell $2.85 to $29.76. Implementing the first of its 12,000 layoffs Thursday, Continental Airlines dropped $3.56 to $13.90.
Insurer American International Group, which said last week it expects its pretax losses from the attack to total $500 million, fell 60 cents to $68.90. Banker Citigroup declined $2.09 to $36.36, while brokerage house Merrill Lynch fell $2.49 to $36.01.
The retailer Target fell $1.36 to $26.90, while cruise ship operator Carnival slipped $1.20 at $18.05.
The market will remain vulnerable to layoff announcements, earnings warnings and economic data as well as any political news.
"There's a lot of uncertainty right now and that's why the market is weak," said Jim Weiss, chief investment officer for equities at State Street Research. "We just don't know a whole lot about many things right now, and it may stay that way for a while."
Analysts said some technical factors are also at work. They said investors might be receiving margin calls — a demand that they repay money borrowed to buy stocks earlier. Another factor is the expiration of stock index futures, stock index options and stock options Friday, a quarterly occurrence called triple witching, which can prompt heavy selling.
Overseas markets also fell Thursday. Japan's Nikkei stock average closed with a loss of 1.6 percent. France's CAC-40 ended down 3.9 percent, and Britain's FT-SE 100 fell 3.5 percent. In afternoon trading, Germany's DAX index was down 5.3 percent.
On Wednesday, the Dow lost 144.27 points, or 1.6 percent, at 8,759.13. Broader indexes also fell. The Nasdaq composite index dropped 27.42 at 1,527.66, a 1.8 percent loss, while the Standard & Poor's 500 index lost 16.66, or 1.6 percent, at 1,016.08.
Reuters and The Associated Press contributed to this report.
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