Stock market impact expected to be short-lived

Keeping a long-term focus
Most market observers noted the financial markets have been able to shrug off terror attacks since 9/11 with limited long-term damage. In an eerily-timed report -– written just before Thursday’s attacks –- Smith Barney market strategist Tobias Levkovich reviewed the history of the market’s reaction to recent acts of terrorism.

“Major attacks on non-U.S. targets have had remarkably little impact on U.S. markets, despite their horrific consequences,” he wrote in a research note to clients Thursday. “Thus, while the mass murders in Bali and Madrid were appalling, markets were profoundly resilient.”

Analysts said investors should continue to focus on the market forces that were in place before the bombing, including the possible impact on corporate profits and consumer spending from the relentless rise in oil prices.

“To the extent that this doesn’t lead to a series of terrorist attacks or something that would effect directly the supply of oil, then I would say it has a fleeting impact,” said Stuart Hoffman, chief economist at PNC Financial in Philadelphia. “But my baseline (forecast) prior to this was a bit slower economic growth -– more because of the effects of oil depressing corporate profits and causing higher costs to consumers.”

While higher energy costs continue to weigh on U.S. companies and consumers, some market watchers believe those impacts remain relatively muted. Transportation companies have begin taking steps to blunt the impact of higher fuel costs, John Welch, a senior broker at Peregrine Financial Group, told CNBC.

“The surcharges that airlines have put on have stuck this time,” he said. “We will probably continue to see additional transportation surcharges, from trucking companies, including probably the U.S. Postal Service here pretty soon. But I'm not sure yet whether that has made a difference in consumers' ability, in the United States anyway, to continue to spend money. “

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