Updated from 12:32 p.m. EDT
After a second day of orderly if thin bond trading, the U.S. capital markets set their sights on Monday and the scheduled reopening of the stock exchanges.
In another abbreviated session, investors bid up Treasury prices in anticipation of monetary easing by the Federal Reserve. The stock exchanges endured their fourth-straight suspended session -- the longest delay since World War I.
Despite the efforts of the exchanges to resume trading Monday, the logistics of restoring the fractured components that constitute the markets -- the people, the firms, the communications systems and the buildings that house all three -- make meeting that timetable a Promethian task.
"The first and foremost concern is restoration of our equity trading business, but no desire to resume trading will ever take precedence over the desire to find every possible human that is buried in that mass and still lives," said Richard Grasso, chairman of the New York Stock Exchange.
European markets sold off Friday after holding fairly firm for most of the week. London's FT-SE 100 closed down 3.8% to 4756 and Paris's CAC-40 fell 5% to 3909. All the major European bourses fell as fears of retaliatory strikes by the U.S. military took their toll amid choppy, pre-weekend volumes. The price of oil rose sharply and the dollar, which had been holding its ground, began falling against major currencies.
Bonds gained for a second day as investors sought safe havens across the yield spectrum. The 10-year Treasury closed up 18/32 at 103 17/32, yielding 4.55%, while the 30-year bond was up 19/32 at 100 12/32, yielding 5.36%. The 2-year note, which saw its yield fall below 3% to an all-time low Thursday, continued to gain in price, adding 7/32 to 101 14/32, yielding 2.89%. Its yield was about 3.50% on Monday.
Volume in the bond markets remained low as traders heeded an unspoken agreement to avoid aggressive speculation, although traders clearly expect aggressive Fed action following Tuesday's terrorist attacks. Trading in October Fed Funds futures implied expectations of a half- to three-quarter-point cut in interest rates, and gave a 60% chance of an easing before the Fed next meets Oct. 2.
Meanwhile, efforts to remove debris from rainy Lower Manhattan continued as President Bush toured the area. NYSE workers rushed to prepare the exchange for Monday's reopening and weekend tests that will gauge price and settlement systems as well the structure's safety and access.
"The market we deliver this Monday at 9:30 will be the traditional market that we deliver, with the fullest and freest price discovery," said Richard Grasso, the NYSE's chairman. Grasso said trading would not be subject to unusual restrictions governing short-selling or options.
A major concern remained the viability of the area's communications infrastructure. Verizon, which provides telephone and data service to Wall Street, said it expected to be ready by Monday morning. "We're activiating spare capacity that exists in our cables and our goal is to reroute as much of the traffic that transited through that area as possible," said Ivan Seidenberg, Verizon's co-chief executive. "I'm confident we will have the kind of capacity needed for a successful opening on Monday, although as you might suspect, you don't know until you open."
Another concern was transportation, as more than 100,000 brokers, traders and support workers could descend on Lower Manhattan Monday morning. Hardwick Simmons, the Nasdaq's chairman, said the exchanges were considering using shuttle buses to get around destroyed transportation routes. "I think it's extremely important that we begin again. To shut down the American capital markets for four days is extraordinary."
The vigil for the missing continued in Manhattan. Morgan Stanley, which was the Trade Center's largest tenant and has about 40 workers still unaccounted for, said it will be ready for business.
"We are ready to resume full operations as exchanges and markets reopen," the company said in a statement. "All our clients should rest assured that their assets are safe and our financial advisors are hard at work contacting our individual investors to answer questions and address their concerns."