Osama bin Laden Dead: US Stocks Edge Lower

Last Updated May 2, 2011 4:47 PM EDT

Nearly 10 years after the 9-11 attacks, US forces killed Osama bin Laden, the mastermind of the largest the terrorist attacks in US history. Last night, President Obama said that "justice has been done," after the leader of al Qaeda was killed in a firefight in Pakistan.

The initial market reaction sent stocks and the US dollar higher, commodities lower. With a little thought, investors concluded that while this news is indeed a great shot in the arm of the national psyche, it should have little long-term impact on the economy and financial assets.

After trading higher in the morning, US stock indexes edged lower on the day. The Dow Jones Industrial Average was down 3 points at 12,807; the NASDAQ Composite was off 9 points at 2,864; and the S&P 500 slipped 2 points at 1,361.

Earlier, European and Asian stock markets hit two-month highs, though volume was light due to holidays in UK, China, Hong Kong, Singapore, Malaysia and Thailand. Tokyo's Nikkei average was up 1.6 percent and closed above the key 10,000 level for the first time since March 11 - the day of the devastating earthquake and tsunami.

The US dollar, which had strengthened earlier, ended the day flat, after a nine-day slide that had left the greenback at the lowest level in three years.

When the bin Laden news broke, commodities markets tumbled. Oil recouped most of its earlier 2 percent drop, with the June contract settling down 41 cents to $113.52 and June gold reversed course and added $0.70 to settle at 1,557.10. The big loser was silver, which plunged as much as 13 percent in Asia, before settling down 5.2 percent to $46.084, due to new exchange rules limiting speculative positions.

Why are markets moving at all? Osama bin Laden didn't control a massive oil field and his death will not change corporate earnings, speed up economic growth, help the housing market or stop gas prices from rising. But investors are human beings, who are often guided by their emotions. Today we feel better - perhaps even optimistic - and as a result, we might feel a little more confident about putting our investment dollars at risk.

It doesn't hurt that the news came on the heels of a strong week and month for US stock indexes. On Friday, the Dow Jones Industrial Average closed out its best monthly performance of the year, rising four percent to 12,810, and is now up 10.6 percent on the year. The S&P 500 gained 2.8 percent in April, up 8.4 percent year-to-date; and the NASDAQ added 3.3 percent on the month to 2873, up 8.3 percent on the year.

Before you jump on the stock bandwagon, I have to don my Certified Financial Planner hat and remind you that just like it's not wise to make trades when markets drop; it's equally dangerous to pile simply because they are rising. Knee-jerk reactions to important reactions can cost you big money -- to prevent that from occurring, here's what you should do:

  • Open your statements
  • Review where you stand
  • Re-balance according to personal goals
  • Beef-up cash for near-term funding (college tuition, car purchase)
If you work with a broker or an advisor:
  • Schedule appointment to review progress
  • Confirm how much service costs
  • Review and update your plan
  • Consider replacing managed funds with lower cost index or exchange-traded funds
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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.