TheSeptember 11 attacks in 2001 were followed by initial shocks causing globalstock markets to drop sharply. In international and domestic markets, stocks of companies in some sectors were hit particularly hard. Travel and entertainment stocks fell, while communications, pharmaceutical and military/defense stocks rose. Online travel agencies particularly suffered, as they cater to leisure travel. The attacks themselves resulted in approximately $40 billion ininsurance losses, making it one of the largest insured events ever.[1]
On Tuesday, September 11, 2001, the opening of theNew York Stock Exchange (NYSE) was delayed afterthe first plane crashed into theWorld Trade Center's North Tower, and trading for the day was canceled afterthe second plane crashed into the South Tower. TheNASDAQ also canceled trading. TheNew York Stock Exchange Building was then evacuated as well as nearly all banks and financial institutions onWall Street and in many cities across the country. TheLondon Stock Exchange and other stock exchanges around the world were also closed down and evacuated in case of follow-up terrorist attacks. The New York Stock Exchange remained closed until the following Monday. This was the third time in history that the NYSE experienced prolonged closure, the first time being in the early months ofWorld War I,[2][3] and the second being March 1933 during theGreat Depression. Trading on the United Statesbond market also ceased; the leading government bond trader,Cantor Fitzgerald, was based in the World Trade Center.[4] TheNew York Mercantile Exchange was also closed for a week after the attacks.[5]
TheFederal Reserve issued a statement, saying it was "open and operating. Thediscount window is available to meetliquidity needs."[6] The Federal Reserve added $100 billion in liquidity per day, during the three days following the attack to help avert a financial crisis.[5] Federal Reserve GovernorRoger W. Ferguson Jr. has described in detail this and the other actions that the Fed undertook to maintain a stable economy and offset potential disruptions arising in the financial system.[7]
Gold prices spiked upwards, from $215.50 to $287 an ounce in London trading.[4]Oil prices also spiked upwards.[8] Gas prices in the United States also briefly shot up, though the spike in prices lasted only about one week.[5]Currency trading continued, with theUnited States dollar falling sharply against theEuro,British pound, andJapanese yen.[4] The next day, European stock markets fell sharply, including declines of 4.6% inSpain, 8.5% inGermany,[4] and 5.7% on the London Stock Exchange.[9] Stocks in theLatin American markets also plunged, with a 9.2% drop inBrazil, 5.2% drop inArgentina, and 5.6% decline in Mexico, before trading was halted.[4]
Insurance losses due to 9/11 were more than one and a half times greater than what was previously the largest disaster (Hurricane Andrew) in terms of losses. The losses included business interruption ($11.0 billion), property ($9.6 billion),liability ($7.5 billion),workers compensation ($1.8 billion), and others ($2.5 billion). The firms with the largest losses includedBerkshire Hathaway,Lloyd's,Swiss Re, andMunich Re, all of which are reinsurers, with more than $2 billion in losses for each.[10] Shares of majorreinsurers, includingSwiss Re andBaloise Insurance Group dropped by more than 10%, while shares ofSwiss Life dropped 7.8%.[11]
Flights were grounded in various places across the United States andCanada that did not necessarily have operational support in place, such as dedicated ground crews. A large number of transatlantic flights landed inGander,Newfoundland and inHalifax,Nova Scotia, with the logistics handled byTransport Canada inOperation Yellow Ribbon. To help with the immediate needs of victims' families,United Airlines andAmerican Airlines both provided initial payments of $25,000.[12] The airlines were also required to refund ticket purchases for anyone unable to fly.[12]
The 9/11 attacks compounded existing financial troubles in the airline industry. Share prices for airlines and airplane manufacturers plummeted in the aftermath.Midway Airlines, already on the verge of bankruptcy, ceased operations almost immediately.Swissair, unable to meet its debt obligations, was grounded on October 2, 2001, and subsequently liquidated.[13] Other airlines faced the threat of bankruptcy, leading to tens of thousands of layoffs in the week following the attacks. To help stabilize the industry, the federal government introduced a financial assistance package that included $10 billion inloan guarantees and $5 billion for short-term assistance.[1]
In the years that followed, these financial pressures accelerated a wave of consolidation among major U.S. airlines. Carriers pursued mergers as a strategy to reduce costs, increase efficiency, and maintain competitiveness in an increasingly volatile market. A series of high-profile mergers reshaped the industry:America West acquiredUS Airways in 2005, a transaction that ultimately led to the combined airline’s merger withAmerican Airlines in 2013. Similarly,Delta merged withNorthwest in 2008, andUnited combined withContinental in 2010. Although the 9/11 attacks served as a catalyst for these consolidations, the trend was also driven by preexisting structural issues within the deregulated airline industry, including high fixed costs, overcapacity, and intense competition.[14]
The reduction in air travel demand caused by the attack is seen as a contributory reason for the retirement ofConcorde, the only remaining supersonic airliner still in service at the time.[15]
Tourism inNew York City plummeted, causing massive losses in a sector that employed 280,000 people and generated $25 billion per year. In the week following the attack, hotel occupancy fell below 40%, and 3,000 employees were laid off. The reluctance to fly may have been due to increased fear of a repeat attack. Suzanne Thompson, Professor of Psychology atPomona College, conducted interviews of 501 people who were not direct victims of 9/11. From this, she concluded that "Most participants felt more distress (65 percent) and a stronger fear of flying (55 percent) immediately after the event than they did before the attacks."[16]
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Since the 9/11 attacks, substantial resources have been put towards improving security, in the areas ofhomeland security,national defense, and in the private sector.[5][17]
In New York City, approximately 430,000 jobs were lost and there were $2.8 billion in lost wages over the three months following the 9/11 attacks. The economic effects were mainly focused on the city'sexport economy sectors.[18] TheGDP for New York City was estimated to have declined by $30.3 billion over the last three months of 2001 and all of 2002. The Federal government provided $11.2 billion in immediate assistance to theGovernment of New York City in September 2001, and $10.5 billion in early 2002 for economic development and infrastructure needs.[19]
The 9/11 attacks had great impact on small businesses inLower Manhattan, located near theWorld Trade Center. Approximately 18,000small businesses were destroyed or displaced after the attacks. TheSmall Business Administration provided loans as assistance, while Community Development Block Grants and Economic Injury Disaster Loans were used by the Federal Government to provide assistance to small businesses affected by the 9/11 attacks.[19]
The September 11 attacks led directly to the U.S.war in Afghanistan, as well as additional homeland security spending. The attacks were also cited as arationale for the Iraq war. In 2008,Joseph Stiglitz estimated that the cost of the two wars would surpass $6 trillion.[20][21]
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