In the wake of the destruction caused by the terrorist attack on lower Manhattan, the nerve center of U.S. finance, all major markets were closed yesterday and will remain closed today, as officials scramble to instill confidence in shaken global investors. When U.S. markets will reopen and what will happen when trading resumes is unclear, as officials sift through the physical damage and human carnage.

There is a risk that U.S. stock markets, already shaky, could follow the jittery reaction in the global markets that did remain open yesterday. In Europe, the Dow Jones Stoxx 50 index of European blue chips plunged 6.1% to its lowest level since August 1998. British stocks fell 5.7%, French stocks 7.4% and German stocks 8.5%.

In a further sign of nervousness, on Wednesday in Asia, the benchmark Nikkei index of major Tokyo stocks was down 5.9% at 9685.77 in midday trading, falling below the psychologically important 10000 mark for the first time since 1984. The dollar fell sharply against both the Japanese yen and the euro, while the price of gold -- considered a haven during times of crisis -- spiked up.

"Even if it's physically possible" to reopen trading, "it may not be practical," Harvey Pitt, chairman of the Securities and Exchange Commission, said in an interview yesterday afternoon. He said officials needed to be sensitive to the tragedy hitting employees, and the state of trading systems. The shutdown will affect all stock and futures markets, which shut yesterday morning shortly after word of the bombing attacks spread.

The Bond Market Association told securities firms that bond trading had been suspended "indefinitely."

The Federal Reserve promised to provide sufficient cash to keep the financial system stable.

The last time the New York Stock Exchange closed for an unscheduled day was Richard Nixon's funeral in 1994, and the last time for two unscheduled days was for V-J at the end of World War II. Perhaps the last big shutdown because of direct damage to financial markets was the 1835 New York City fire. Past history suggests the stock market will likely tumble when it finally opens again for trading, but a rebound could follow. The Dow Jones Industrial Average sank 2.9% the day after the Pearl Harbor bombing, perhaps the most comparable tragedy in U.S. history, according to brokerage firm A.G. Edwards in St. Louis.

The U.S. stock market was in a bear market and the economy struggling at the time of Pearl Harbor, similar to its state before yesterday's surprise attack. The Dow average was down a full 9.7% three months after the Pearl Harbor attack.

But the Dow average was off just 0.1% 12 months after the attack, after signs of an economic recovery emerged.

The market has generally shrugged off terrorist attacks such as the one against the federal office building in Oklahoma City or the first bombing of the Trade Center, though those attacks were less severe than this one. "In terms of magnitude, this is so much greater, I don't think it's comparable," said Steve Leuthold, head of Leuthold Group, a money-management and research firm in Minneapolis. He added that the Kennedy assassination was a reasonable comparison because people believed it was part of a broader attack on the U.S. government.

The market was open at the time of the attack and quickly fell 4% before trading was halted. But when the market reopened several days later following the president's funeral, it was clear to investors that the government was secure, and the market surged 4% that day.

Some analysts feared a prolonged shutdown of U.S. markets could only further erode investor faith in workings of the financial markets. "Keeping the markets closed shows that terrorists brought you to bay, and it also creates more uncertainty," said Gary Gensler, the top Treasury official overseeing financial markets for the Clinton administration. Open markets would "allow for a lot of economic pressures to be relieved in an orderly way," he added.

But others speculated that an extended period with no trading could allow markets to reopen in a climate of calm, once the initial period of panic and rumor had passed. "The longer it takes, the less shock there's going to be," Mr. Leuthold said.

"I'm more concerned about the mental state of the people exposed to this kind of tragedy up close," Mr. Pitt said. "We need a period to calm down. It would be unwise to force people back to work," he added.

Today, firms, markets and exchanges will need time to assess the effect of operations that were lost in the collapse of the towers, Mr. Pitt said. For instance, the NYSE had a number of operations in one of the two towers, including some regulatory offices. Regulators also says it is impossible to know the amount of records that were lost in the various offices of Wall Street firms located in the towers.

In Washington, the President's Working Group on Financial Markets -- made up of the chief financial regulators, the Federal Reserve, the Treasury, the SEC, and the Commodities Futures Trading Commission -- held formal and informal conference calls throughout the day yesterday, and issued a late-afternoon joint statement backing the decisions to close markets and expressing "confidence that trading will resume as soon as it is both appropriate and practical." One issue to be weighed by regulators today is whether to allow some markets, such as the Chicago futures markets, to reopen prior to other markets.

Soon after the first attack in the heart of the financial center in lower Manhattan, markets began announcing that the trading openings would be delayed. But the NYSE and Nasdaq Stock Market, the two largest stock markets, never began trading, as the scope of the damage became clear. The SEC said all regional exchanges, and the American Stock Exchange also closed for the day.

In addition, most commodity futures and options markets nationwide shut down. New York Board of Trade, located in an nearby World Trade Center building, was destroyed when the towers collapsed. The New York Mercantile Exchange closed, followed by Chicago Board of Trade and Chicago Mercantile Exchange. Fannie Mae, based in Washington, postponed the scheduled announcement of its benchmark bills and notes yesterday in light of the market's closure. The Treasury canceled permanently yesterday's four-week bill auction.

Later in the day, another Trade Center building collapsed, destroying the SEC's three-floor New York offices. The SEC's 300 New York employees had already been evacuated.

Throughout the day, shocked financial-district workers filtered northward along streets largely barren except for emergency vehicles. Michael O'Brien, a supervisor at the NYSE, said traders and other staff had been out on Broad Street watching the fires caused by the impact of the airplanes when the first of the towers collapsed. "There was black smoke billowing down Broad St.," said Mr. O'Brien, who fled back inside the exchange with colleagues. "It looked like Indiana Jones."

Trading on the floor, which usually starts at 9:30 a.m. Eastern time, never began, said Mr. O'Brien. When the second plane collided, lights flickered inside the exchange, according to Mr. O'Brien and two other supervisors whose green tunics were dusted in the fine powder that coated downtown after the disaster. "They told us to stay calm," said Mr. O'Brien "But our natural reaction was that our building could be a major target. There was a lot of subdued fear on the trading floor."

He said that after the buildings collapsed, NYSE employees were told to stay inside the building. Injured were brought into the NYSE off the street, and carried across the trading floor to a triage set up by NYSE medical staff at the new trading room at 30 Broad Street. Mr. O'Brien said about 20 injured were treated in the exchange, with four collected by ambulances and taken to hospitals.

Mr. O'Brien and the other two supervisors said the area near the trade center after the collapse reminded them of disaster images from the eruption of Mount St. Helen's. "You go onto Wall St. and you can scoop of vials of dust off the street," he said.

"It hasn't sunk in yet," said another NYSE supervisor, who still had debris in his hair, and didn't want his name used. "It hasn't sunk in yet. We hope that President Bush, who was elected to do the right thing, does do the right thing."

Nasdaq officials had a frightening view of the terrorist attack from their offices in the 49th and 50th floors of One Liberty Plaza, located across the street from the World Trade Center. Scott Peterson, a spokesman, said he and others saw an American Airlines flight "coming in low, wings wagging back and forth" before it crashed in the World Trade Center.

After the explosion, a group of Nasdaq officials decided to evacuate the building, making their way through broken glass at street level and the chaos of other workers trying to escape the area over the Brooklyn Bridge.

When the Nasdaq officials flagged down a car and found other bridges in Brooklyn closed, they arranged to be picked up by boat and ferried to Connecticut, on route to Nasdaq's data center in Trumbull to monitor the market situation. Other senior executives set up a command post in a midtown hotel.

Although most European markets officially remained open yesterday, most traders there found it difficult to do much business. Several firms shut down early, and staff at others were glued to television screens for news updates. One German fund manager shrugged off calls, saying it was "wrong to be talking about stocks when thousands of Americans are dying."

Business in London's financial district ground to a standstill yesterday afternoon as traders and salesmen, stymied by clogged-up telephone lines to the U.S., resorted to watching stunning footage on television of the terrorist attacks and the damage they wreaked.

"The biggest worry is the short-term damage this [terrorist crisis] does to the U.S. economy, which was already bordering on recession," said Gary Dugan, a European equity strategist at J.P. Morgan Fleming Asset Management in London. "There's huge risk-aversion spreading through the markets; people are just selling."

Sergio Albarelli, a director at Milan brokerage Franklin Templeton Sim, fretted that closing markets would only compound investors' anxiety. "The most worrying aspect is how long markets will stay closed since this has repercussions on all economic activity, and it's a risk for stability to keep them closed," he said.

Back in the U.S., those investors able to contemplate the markets tried to figure out how stocks will react to the tragedy. Al Goldman, chief market strategist at A.G. Edwards, said he fielded more than 20 calls from the firm's brokers throughout the day.

Mr. Goldman, who had been among the more upbeat analysts, said the attacks will badly hurt the nation's economy and lower the gross domestic product during both the third and fourth quarters this year, chiefly by crippling consumer spending. "Consumer spirits will be hurt, there's no doubt," he said. "People aren't going to want to go to the mall, to dinner or take trips."

Silvia Ascarelli in London, and Gregory Zuckerman and Ken Brown in New York contributed to this article.

How the World's Markets Reacted

Europe

Latin America

Asia*

*Asia's markets closed before having a chance to react to the news, but by midday, Japan's Nikkei fell nearly 6%.

Source: WSJ Market Data Group