Banks Shake Off Terror Threat

Wall Street shrugged off the federal government's latest terror warning Monday, with most financial services stocks showing only muted losses in early trading.

One day after the government warned that al Qaeda may be targeting banks and monetary institutions in New York, Washington and Newark, N.J., the action in the stock market was calm, with most of the selling occurring in tech shares. The Dow Jones Industrial Average was virtually unchanged at 10,138.

Financial stocks were little moved, despite the government's warning that terrorists are setting their sights on buildings owned by Citigroup(C Quote) and Prudential Financial(PRU Quote), as well as the New York Stock Exchange and the International Money Fund in Washington. The Philadelphia Bank Index was down a half-percent, while the Amex Broker Dealer Index fell a little under 1%.

With machine-gun-toting police and bomb-sniffing dogs now a familiar sight outside the NYSE, many traders and investors took the warning in stride. At the corner of Broad and Wall Streets in lower Manhattan, tourists continued to snap photos of the stock exchange building, as if it were just another summer day in the big city.

"The good things about these warnings is it means nothing is probably going to happen," says Timothy Ghriskey, president of Solaris Capital, a Connecticut-based hedge fund. "A key part of terrorism is surprise."

Not surprisingly, shares of Citigroup and Prudential felt pressure in light of the warning. Citigroup dropped 48 cents, or 1.1%, to $43.61, while Prudential fell 56 cents, or 1.2%, to $46.

Officials from both Citigroup and Prudential were unavailable for comment on the threats. But local authorities took steps to protect both buildings. In Newark, police closed off two streets by Prudential's headquarters and erected a metal fence around the building. Armed officers were seen patroling outside Citigroup's mid-Manhattan office tower.

Neither Citigroup nor Prudential was the hardest-hit financial stock of the day. That honor went to LaBranche(LAB Quote) and Van Der Moolen(VDM Quote), the two publicly traded NYSE specialist firms. Shares of LaBranche were down 24 cents, or 2.9%, to $7.95, while Van Der Moolen declined 17 cents, or 2.7%, to $6.24.