Dow Ends Down 220, Nasdaq Falls 56greenspun.com : LUSENET : Unk's Troll-free Private Saloon : One Thread
Dow Ends Down 220, Nasdaq Falls 56 Mon Feb 4, 5:36 PM ET
By LISA SINGHANIA, AP Business Writer
NEW YORK (AP) - New questions about accounting practices at Tyco and Enron provoked a broad selloff on Wall Street Monday as investors grew more doubtful about the honesty of corporate bookkeeping in general. The Dow Jones industrials tumbled more than 200 points in a decline that accelerated late in the session.
Analysts said investors were concerned that other companies might have used the same kind of accounting methods as Enron and Tyco. Amid weak corporate earnings forecasts and concerns that prices are already too high, the news made stocks even less appealing.
"There's no trust out there right now. It's a question of which stock do you have in your portfolio that could be the next problem ... so why be invested?" said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
The Dow closed down 220.17, or 2.2 percent, to 9,687.09, giving back much of the rebound last week that followed a similar drop on worries about Tyco and Enron.
Broader stock indicators also fell, with technology issues particularly hard hit. The Nasdaq composite index lost 55.71, or 2.9 percent, to 1,855.53. The Standard & Poor's 500 index was off 27.76, or 2.5 percent, at 1,094.44.
The selloff extended what has so far been a disappointing year on Wall Street, with investors concerned about the economy and worried that the problems that brought Enron down are not isolated. Investors are growing skeptical about the accuracy of corporate reports and bookkeeping in general — and fear that more companies are in worse shape than their results suggest.
A report by three Enron board members that said the company deliberately misrepresented its financial condition worsened Wall Street's mood, as did former chairman Ken Lay's decision not to testify before a congressional committee. A Senate panel was expected to decide Tuesday whether to issue a subpoena.
Tyco International tumbled $6.96, or 19 percent, to $29.90 on a Wall Street Journal report that it spent about $8 billion in the past three fiscal years on more than 700 acquisitions that were never announced to the public. Standard & Poor's and Fitch also downgraded some of their ratings of Tyco debt and expressed concerns about the company. The company denied that its bookkeeping practices were improper.
Investors also sent Williams Cos. down $2.64, or 14 percent, to $16.36 after the company said it is prepared to sell more assets and issue more stock to keep its credit rating. In the last week or so, questions have been raised about Williams' obligations to its former telecom subsidiary, the Williams Communication Group, which is facing financial problems. Williams Communications lost 42 cents to $1.
The selling spread to other telecommunications companies, including AT&T Wireless, which fell 94 cents to $10.12. Its former parent company, AT&T, fell $1.03 to $16.30.
WorldCom fell $1.48 to $8.13, a 15.4 percent drop, on rumors the company might have to write down some of its assets to reduce debt.
Financial stocks were weak, too, reflecting concerns that their lending practices would make them vulnerable should companies start revising balance sheets. American Express lost $1.68 to $33.42.
Even companies not under particular scrutiny suffered. General Electric dropped $1.85 to $35.00.
Among tech issues, Ciena dropped $1.88 to $10.12 on concerns the optical networking industry will take time to recover. The sector is considered to be overpriced by some, making it more vulnerable to selling when investors are worried about future returns.
"I think it's become more of a 'Sell now, ask questions later' market until people feel more confident about earnings," said Tom Galvin, chief investment officer at Credit Suisse First Boston.
Declining issues led advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 1.42 billion shares, more than the 1.38 billion reported Friday.
The Russell 2000 index lost 9.95 to 470.09.
Overseas, Japan's Nikkei stock average lost 1.6 percent. In Europe, Germany's DAX index slid 2.20 percent, Britain's FT-SE 100 dropped 0.4 percent, and France's CAC-40 fell 1.3 percent.
-- (The real bottom @ is still down there. somewhere), February 04, 2002
The dotcom fiasco got people thinking that stock was supposed to rise sharply, enabling investors to cash out with big profits in short periods of time. In reality, businesses who provide a quality product do not have sudden, extrme increases in stock value. Too many people have been brainwashed by the dotcom craziness, and assume a lot of things that have no bases in reality. They also are products of the commercialization, where they don't do any thinking for themselves, they don't want to do the work entailed in researching a company, they rely on "advisors" to do it for them.
As was stated this past weekend by one advisor who saw big flaws in Enron early last summer. He worded his advisory about Enron in such a way that people needed to read between the lines to get his drift. He said no advisors would publicly denounce any stock because that in itself could drive the value into the ground, whether it deserved it or not. So basically, you will never get negitive projections on any stock, you have to "read" their subtle advise against them. No way for the public to ever get a warning, and stocks are usually hyped up beyond their real value, so investing in todays world is a blind gamble.
And we are supposed to privatize Social Security? The congress decemated the safeguards with legislation in 1995. It is not within the realm of possibility that Enron executives have done nothing illegal. This is because the congress relazed the laws and rules to the point where the actions taken bu Enron (and don't kid yourself-thousands of other companies) took advantage of the laws to their won advantage. We now have a stock market that is built on falsehoods, there is no way to know which stocks hold true value and those who's value is based on nothing but hot air.
-- Cherri (firstname.lastname@example.org), February 05, 2002.