Numbers crunch Wall St.
U.S. stocks pressured by Tyco, Enron, WorldCom, accounting worries.
NEW YORK (CNN/Money) - Investors came down with another case of 'Enron-itis' Monday, and stocks tumbled as more questions arose about accounting at Tyco and angry lawmakers vowed to get to the bottom of the Enron mess.|
The developments heightened worries about how soon corporate profits would pick up, prompting investors to push blue-chip stocks to their second-lowest close of the year.
The Dow Jones industrial average sank 220.17 to 9,687.09, a loss of 2.2 percent that left the world's most widely watched stock index at its lowest since last Tuesday, when the first case of Enron-related woes hit.
The selling spilled into other sectors, and the Nasdaq composite index, weighted with technology stocks, tumbled 55.71 to 1,855.53, a drop of 2.9 percent, while the Standard & Poor's 500 lost 27.76 to 1,094.44, a 2.5 percent decline.
"It was a pretty dismal day. We're really in oversold conditions at this point," Larry Wachtel, market analyst at Prudential Financial told CNNfn's Street Sweep.
Shares of Tyco International (TYC: down $5.73 to $29.90, Research, Estimates) were pressured after the Wall Street Journal alleged that the conglomerate spent $8 billion on more than 700 acquisitions during the last three years without making the information public. The company sent a response via a letter to the editor vehemently denying withholding the information.
Lawyers for former Enron (ENE: Research, Estimates) CEO Kenneth Lay said Sunday that he wouldn't testify before the Senate Monday as had previously been scheduled, saying the hearings seem to have a "prosecutorial tone." The Senate Commerce Committee said Monday it will subpoena Lay.
Network equipment maker Enterasys, Irish pharmaceutical company Elan and telecommunications services company WorldCom were among the other companies also exerting pressure with a variety of accounting and corporate weakness concerns.
"People are spooked by Enron and Tyco. There's an overemphasis on the negative right now. There have been some positive corporate and economic reports that are being set aside," said Donald Selkin, chief investment strategist at Joseph Gunnar. "Things are not as bad as what the market action is telling us. Not every stock is an Enron."
Treasury prices rose in response to the stock decline, with the 10-year note yield closing at 4.90 percent, down from 4.98 percent late Friday.
In overseas trade, Asian and European stocks closed lower. The dollar was a little stronger against the euro and weaker against the yen. Light crude oil futures fell 32 cents to $20.07 a barrel in New York.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by more than 2-to-1 as 1.42 billion shares changed hands. On the Nasdaq, decliners beat advancers by almost 3-to-1 as 1.76 billion shares traded.
Enron fallout hits techs and blue-chips
Broad-based technology selling was disrupted only by a little buying in the chip equipment sector, following a Goldman Sachs note, while 27 out of 30 Dow issues closed lower.
On Sunday, Microsoft (MSFT: down $1.54 to $61.12, Research, Estimates) Chairman Bill Gates said he sees no global economic recovery this year, but more of a sideways movement, going against the grain of recent optimism pointing to a quick recovery. Gates was speaking at the five-day World Economic Forum summit of political and business leaders in New York.
Deutsche Bank Alex. Brown downgraded Dow component and diversified manufacturer United Technologies (UTX: down $3.06 to $66.99, Research, Estimates) to "market perform' from "buy." 3M (MMM: down $3.77 to $109.50, Research, Estimates) and Citigroup (C: down $2.19 to $44.30, Research, Estimates) were the other two Dow stocks trading down by more than $2, with General Electric (GE: down $1.85 to $35.00, Research, Estimates) and IBM (IBM: down $1.20 to $106.80, Research, Estimates) not far behind.
Hewlett-Packard (HWP: up $0.04 to $22.04, Research, Estimates), whose merger with rival Compaq (CPQ: up $0.10 to $12.20, Research, Estimates) still is pending, initially was one of the Dow's bright spots after it said it expects first-quarter results to exceed previous estimates. But the stock turned negative by afternoon.
Procter & Gamble (PG: up $0.13 to $82.70, Research, Estimates) and Hewlett-Packard were the only two Dow stocks that closed in positive territory, while Coca-Cola (KO: unchanged at $44.68, Research, Estimates) closed at breakeven.
WorldCom (WCOM: down $1.48 to $8.13, Research, Estimates) and Nextel (NXTL: down $1.07 to $6.78, Research, Estimates) helped insure that telecommunications issues will continue to be slammed on the Nasdaq.
Riverstone Networks (RSTN: down $1.73 to $13.99, Research, Estimates) plunged on its connections to Enterasys (ETS: down $6.60 to $4.20, Research, Estimates), which is being investigated by the Securities and Exchange Commission and may be having accounting troubles. Both Riverstone and Enterasys were spun off from Cabletron (CS: Research, Estimates).
Online retailer Amazon.com (AMZN: down $1.20 to $12.53, Research, Estimates) was lower after a Wall Street Journal report questioned whether the company has as many liquid assets to cover obligations as it has implied in its most recent statement.
Priceline.com (PCLN: down $1.49 to $4.83, Research, Estimates) said first-quarter results might miss current estimates. The online travel retailer also posted a fourth-quarter profit of a penny a share, compared with analysts' estimates of breakeven results. The company lost 15 cents a share a year earlier.
Irish drug company Elan Corp. (ELN: down $15.10 to $14.85, Research, Estimates), in the news recently for problems with its Alzheimer's vaccine, warned that its 2002 results will sharply miss analysts' expectations. The company also reported a fourth-quarter profit that met estimates and improved on earnings from a year ago.
On a positive note, after three quarters of declines, the Semiconductor Industry Association said worldwide sales of chipmakers were unchanged in the fourth quarter from the third.
In addition, brokerage firm Goldman Sachs upgraded the semiconductor capital equipment sector, in particular highlighting KLA-Tencor (KLAC: up $0.58 to $57.26, Research, Estimates), adding it to its Recommended List; Novellus (NVLS: down $1.21 to $40.64, Research, Estimates) was raised to "market outperformer"; and leader Applied Materials (AMAT: up $1.03 to $43.98, Research, Estimates) stays on the Recommended List and was highlighted as the list's "single best idea."
In a move that some analysts are characterizing as a "flight to quality," Durban Deep (DROOY: up $0.75 to $2.76, Research, Estimates), Glamis Gold (GLG: up $0.42 to $4.95, Research, Estimates) and a number of other gold stocks found themselves extremely active and on the rise.