You might call it the dog that didn’t bark.
The struggling stock market so far this week has been remarkably docile in the face of the plunge by a U.S.-led coalition into a war of unfathomable dimensions and duration.
The calm may depict a spring coiling for greater impact. But since the first week after the stock market reopened following the Sept. 11 terrorist attacks, the price volatility of stocks has fallen to a level well within the normal range of the last three years.
Implied fear in the stock market, as measured by an index tracked at the Chicago Board Options Exchange, remained elevated far longer after the financial crises of 1998, when the market was riding high, Russia defaulted on international loans and a giant U.S. hedge fund nearly collapsed.
The intraday ranges of major stock market indexes, including the Dow Jones industrial average and the Nasdaq composite index, have relaxed to levels below many of the sessions just before Sept. 11.
Trading volume on the Nadaq and New York exchanges in the last two days has faded to the relatively sleepy numbers posted in August.
Waves of selling by mutual funds, faced with shareholder redemptions and the Oct. 31 end of the fiscal year for many funds, are not apparent.
In short, it looks like business as usual on Wall Street–exactly what President Bush and others have been urging.
The seeming tranquility has many possible explanations. Stock prices have been slumping for a year and a half. The near-term outlook for corporate profits is uninspiring, to say the least.
A war rally seems as unlikely as a crash from current price levels.
Third-quarter corporate financial reports now emerging are likely to provide little guidance beyond the overall bleak outlooks many companies have expressed in recent weeks.
Indeed, some analysts suspect companies will bulk up losses for the third and fourth quarters, blaming the Sept. 11 attacks and throwing in all conceivable bad news. That way, year-over-year percentage gains in sales and earnings to be reported a year from now might look better.
Meanwhile, traditional investing alternatives to stocks have not asserted themselves. Interest rates are at historic lows. Oil prices have fallen sharply since Sept. 11. Gold has rallied but remains below levels seen in the first half of 2000.
In short, the supine state of financial markets is such that even the hostilities evident so far are not enough to generate buying or selling excitement.
Imagine, for example, what would have happened in the stock market if the terrorists had hit in late 1999, when Wall Street was booming and optimism ruled.
Tuesday’s action: Stocks slipped for a second day Tuesday in moderate trading, as a brief rally in semiconductor issues faded.
Separately, the Supreme Court declined to hear Microsoft’s appeal to overturn a lower court ruling that it broke U.S. antitrust laws.
Treasury bonds also lost ground, as the stock market held fairly firm and analysts began to debate the size of the expected federal deficit.
The Dow Jones industrial average lost 15.50 points, to 9052.44. New York Stock Exchange volume reached 1.17 billion shares.
Losing issues held a narrow lead over winners among NYSE-listed stocks. The Standard & Poor’s 500 index fell 5.69, to 1056.75.
The Nasdaq composite index dropped 35.76, or 2.2 percent, to 1570.19, on Nasdaq trading volume of 1.53 billion shares. Losers topped winners by 10-7.
Microsoft dropped $3.48, to $54.56.
After the close of trading, Motorola posted third-quarter results in line with analyst forecasts and said its personal communications unit resumed profitability in the quarter.
The Russell 2000 index of small-company stocks dropped 3.50, to 408.68.
Treasury auction: Interest rates fell again at the weekly auction of 3- and 6-month Treasury bills.
The discount rate of 3-month bills was 2.18 percent, the lowest rate since Aug. 1, 1960. The rate on 6-month bills was 2.15 percent, the lowest 6-month auction rate on record.
The coupon-equivalent investment yields awarded at Monday’s auction were 2.22 percent for 3-month bills and 2.20 percent for 6-month bills.
