|
Big Blue turns Wall St. red
|
 |
February 19, 2002: 5:00 p.m. ET
IBM magnifies accounting worries, punishes tech stocks, broader market.
By Staff Writer Alexandra Twin
|
NEW YORK (CNN/Money) - IBM set the tone for a stock selloff Tuesday, with tech issues the biggest casualties, as the computer hardware maker became the latest name to find its accounting practices under the microscope of public scrutiny.
The Nasdaq composite index fell 54.59 to 1,750.61, to its lowest close since mid-November. The Dow Jones industrial average lost 157.90 to stand at 9,745.14. The Standard & Poor's 500 pulled back 20.84 to end the day at 1,083.34.
"Accounting concerns continue to dominate the market," said Jack Ablin, chief investment officer at Harris Trust. "We're going to be seeing this 'Prove it to me' investing for a while."
Nicknamed "Big Blue," IBM (IBM: down $3.35 to $99.54, Research, Estimates) is the latest in a long string of companies to suffer on accounting concerns after the fallout from bankrupt energy trader Enron.
The stock has been a huge pressure point on the Dow for two sessions following a report Friday questioning the accounting of a unit sale last year to JDS Uniphase (JDSU: down $0.18 to $5.89, Research, Estimates). The company responded to the allegations but saw little respite from the selling in an atmosphere of heightened worries about corporate accountability.
On Tuesday, the computer maker's chief financial officer told the Wall Street Journal that the company will be releasing more detailed financial income information than it did previously.
Separately, Prudential Securities cut its 12-month price target on IBM to $100 from $111.
IBM's choice to disclose more information probably reflects a broader trend that is developing within the corporate sector right now, Phil Dow, equity strategy director at RBC Dain Rauscher, told CNNfn's Halftime Report.
"You're going to see a lot of companies voluntarily take the smoke and mirrors out of their business," Dow said. "We shouldn't expect to see an immediate recovery, but eventually people will regain confidence."
Nextel Communications (NXTL: down $1.31 to $3.55, Research, Estimates) was the Nasdaq's most active issue. The telecommunications company has been hit hard for most of the year on accounting concerns. It took another pounding Tuesday, shedding 22 percent, on news that its wholly owned NII Holdings subsidiary will take a $1 billion-to-$2 billion debt restructuring charge.
"There's a minor witch hunt going on. Everyone is focusing on the negative," Ted Weisberg, trader for Seaport Securities, told CNNfn's Market Call.
Asian stocks closed lower Tuesday, with Tokyo's Nikkei index down sharply, while European bourses closed lower on tech and automaker concerns.
Treasury prices slid a little, with the 10-year note yield closing the day up at 4.88 percent from 4.87 percent Friday. The dollar was stronger versus the euro and the yen. Light crude oil futures fell 64 cents to $21.10 a barrel in New York. In Chicago, gold futures fell $5.40 to $293.60 an ounce.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by more than 2-to-1 as almost 1.18 billion shares changed hands. On the Nasdaq, losers topped winners 5-to-2 as 1.73 billion shares traded.
Tech bellwethers also hurt Nasdaq
Networking equipment maker Cisco Systems (CSCO: down $0.28 to $16.81, Research, Estimates), a Nasdaq leader, was down after a New York Post article suggested the company's relationship with Sequoia Capital had some similarities to the off-the-books deals that wrecked Enron.
Wit Soundview cut Sun Microsystems (SUNW: down $0.57 to $8.33, Research, Estimates) to "hold" from "buy" after the firm conducted a survey which showed the largest maker of Unix servers having trouble with budgets.
KLA-Tencor (KLAC: down $1.80 to $58.47, Research, Estimates) fell after Wells Fargo downgraded the semiconductor equipment maker to "market perform" from "strong buy."
In addition to IBM, the biggest decliners on the Dow included Microsoft (MSFT: down $1.30 to $58.93, Research, Estimates), Citigroup (C: down $1.91 to $42.22, Research, Estimates) and 3M (MMM: down $1.53 to $113.99, Research, Estimates).
Dow component Wal-Mart Stores (WMT: down $0.74 to $59.29, Research, Estimates) reported a fiscal fourth-quarter profit Tuesday that grew from the same period one year earlier, in line with forecasts, on better-than-expected sales. The company also said it expects current-quarter and full-year earnings per share to meet or slightly exceed expectations.
Perhaps pressuring the stock, Wal-Mart also said that while it is seeing more customers, its average ticket count per customer does not yet signal an acceleration in economic activity.
UBS Warburg upgraded General Motors (GM: down $0.31 to $50.01, Research, Estimates) to a "buy" from a "hold" and raised its 12-month price target to $60 from $50. The firm said that the company should focus on protecting market share rather than combating decline and said that it will emerge "sitting pretty" versus competitors such as Ford Motor Co. (F: down $0.34 to $14.28, Research, Estimates).
Ciena (CIEN: down $0.28 to $8.45, Research, Estimates) said Monday it will buy fellow optical networking equipment maker ONI Systems (ONIS: up $0.40 to $5.94, Research, Estimates) in a stock-swap deal worth $900 million that puts a 12 percent premium on shares of ONI.
Sabre Holdings (TSG: down $2.34 to $42.94, Research, Estimates) is seeking to buy the remaining shares of Travelocity.com (TVLY: up $5.71 to $24.91, Research, Estimates) that it does not already own for $23 per outstanding share. The online travel reservation network currently owns 70 percent of Travelocity.
In economic news, data on home building rose in January, the government said, as both the number of new housing starts and building permits exceeded estimates. 
|
|
|
|
|
|
|
