Although calm has returned to the New York Stock Exchange, further volatility appears inevitable in the near term amid uncertainty about the scope of U.S. military action against terrorism.

It also remains to be seen what impact the anticipated retaliation will have on the U.S. economy in general and company profits and consumer spending in particular.

The market is awaiting third-quarter U.S. corporate earnings reports due out shortly.

Motorola and other U.S. firms are to announce their earnings results next week. A raft of earnings reports will converge in the third week of this month, offering clues on earnings prospects for the October-December quarter.

The New York market reacted positively to Tuesday's interest rate cuts by the Federal Reserve, the ninth this year, and investors are now counting on more fiscal stimulus proposed by U.S. President George W. Bush.

Still, the stern realities of company profits will no doubt continue weighing heavily on stock prices.

In the worst case, the Dow Jones industrial average could fall to around 7,500 later this year, down from around 9,000 at present.

In the current market environment, where many shares remain vulnerable to selloffs, it is quite natural that investors have switched away from beaten-down issues.

Instead, long-neglected communications issues are coming into vogue again along with medicine, food and public utility issues.

The devastating terrorist attacks have brought market attention back to manufacturers of cellular phones.

Their shares had repeatedly taken a battering since the burst of the information technology bubble and are now drawing attention along with cyclical issues sensitive to domestic demand.

Investors are beginning to count on a global information technology recovery that will help pull electronic machinery manufacturers out of the slump. Another bright spot is stability maintained on the currency market.

A steep fall in New York stock prices accompanied by a weak dollar is typically a bearish scenario for the Tokyo stock market. A further fall in New York could drive down the 225-issue Nikkei average to around 8,500.