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Equity markets to remain closed Thursday as treasury market to trade.

The SEC and heads of the major stock markets determined to keep the equity markets closed Thursday with a statement that they will open at the latest on Monday. There is talk that the markets will open on Friday, but we do not see that as the best plan of action as we could see the first day back as quite rocky, and the markets and investors would not want one big down session and then having to stew over the weekend for the next day of trading. There needs to be a rhythm develop, and after such a tragedy it would be very difficult to do so in one day. The desire to get the market up and running may be outweighed by the need to have a full week of uninterrupted trading to smooth out the action.

The treasury market will trade starting on Thursday. It will most likely close early (2:00 ET). We expect to see strong action in treasuries based on a flight to quality and the anticipation of a 50 basis point rate cut by the Fed in the very near term.

Overseas markets bounce back.

It was nothing compared to the selling, but the overseas markets sold down a bit more early, and then reversed and closed positive. The FTSE was up 136.10 points; the CAC 40 up 54.51; the DAX up 61.67 points.

This is typical action after a major crisis: heavy selling, a follow through the next session, and then a reversal and rally back. We will have to see how well these markets can sustain any upward momentum after the selling, and we will watch closely Thursday's action. We have to remember that these indexes much like the U.S. were tied to shaky economies; the fact that there have been shutdowns of European and other economic activity will not help their economies. Still, the bounce back today, if not followed by a resumption of heavy selling, is a good sign even if the overseas markets slide back a bit. It indicates that the initial reaction has been absorbed to a certain extent.

Dollar stages a bit of a recovery.

After Tuesday's sharp selloff, the dollar mounted solid gains against the Euro and the Yen, while finishing off 1 cent against the Pound. This is somewhat of an indication of optimism in the short-term economic impacts on the U.S. It also is a result, however, of serious activity by the Fed and foreign central banks. The Fed was calling central banks around the globe and asking them to discourage currency trading if at all possible. That no doubt had a positive effect in minimizing the trading of the dollar and allowing it to catch its breath so to speak.

The Fed and central banks also responded with liquidity injections. The G-7 issued a statement that flatly stated that liquidity would be provided, no ifs, ands or buts. Backing up this statement, the Fed injected over $38.25 billion into the system overnight, ten times the normal amount. Japan increased its currency availability by one-third. Similar increases were made by other key economies. Indeed, the Fed said the bank windows were open and the money was there.

What is ahead?

The economy is a real concern on the television. There is merit to those concerns. Think about how tremendous sectors of the economy have been shut down for two days: airline travel, vacation travel and associated dollars, business travel and those dollars, sporting events, television events, etc. The list is long. Retail sales are estimated to have lost $15 billion the past two days.

Yes, the impact will most likely result in that negative GDP for this quarter. As bad as that sounds, it is not a total surprise and it is really not an accurate measure. Much as with the spike in oil prices that receded in a few months (remember how that was all artificial), this drop in economic activity is artificial. The big issue is whether the consumer gets right back on track and we can go about closer to business as usual than not despite this tragedy that has rattled us all. Our best defense is to once again return to our unequaled drive and ingenuity and remain the brightest light of economic prosperity and opportunity for all. That gives us the strength to overcome and vanquish those who are trying to disrupt our way of life. What better way to pay tribute to those lost than to re-establish safe and secure lifestyles here at home along with a safe and prosperous future for our children?

There is no doubt there will be additional economic stimulus. The Fed will most likely cut 50 basis points in the near future, something it will have to do to catch up with the 2 year treasury that will no doubt rally well. Then there is the talk of fiscal policy changes such as capital gains tax cuts. The White House has made it clear that all funds necessary will be available for rescue and recovery operations, and it is a sure bet that fiscal measures will be coming soon.

There will be massive efforts to calm and reinvigorate the consumer, keep the markets very liquid, and supply further economic stimulus to all sectors of the economy in a multi-headed attack on any potential economic slowdown. That is what was needed in the first place.

The rest of the week.

We will continue to monitor the economic developments for you and prepare you for the re-opening of the markets. The usual scenario is a selloff and then recovery. The one time it did not was World War II. We are now going to be at war with terrorism, but we again think we can regain our way of life while we wage that war. We are resilient, and we rally to causes. Just look at how blood banks, less than 36 hours after the tragedy began, are full and turning people away. Strength of character, strength of will, strength of compassion.

The situation is fluid, but we expect pressure at first and then a recovery. We will look closer at this once we get the signal as to when the markets will open once again. Stay strong, stay resolute, take care.

Jon L. Johnson and The Daily Staff

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