NEW YORK (CNN/Money) -
Rumors about more accounting problems such as the ones at WorldCom erased Thursday's early gains in the U.S. stock markets.
Specifically, there was talk that No. 1 automaker General Motors (GM: down $0.92 to $52.16, Research, Estimates) would have to restate its results, sending the Dow Jones industrial average skidding. But GM has denied the rumors, according to Briefing.com, while a spokesman for the company's satellite TV division, GM Hughes Electronics (GMH: down $0.25 to $9.45, Research, Estimates), told CNN/Money he knew of no corporate developments to account for stock price volatility.
Still the damage was done. Around 12:10 p.m. ET, the Dow Jones industrial average fell 52.61 to 9,067.50. The Nasdaq composite index lost 5.20 to 1,424.13. The Standard & Poor's 500 index dipped 4.38 to 969.15.
WorldCom remained halted for trade following its disclosure Tuesday of what may be the biggest accounting fraud in stock market history. The news had sent stocks reeling early Wednesday, before a late-day recovery, and still hangs over markets as an Enron-like reminder of the corporate governance concerns that have plagued stocks since last year.
Other telecom issues have been battered as a result of the WorldCom woes, including Dow components SBC Communications (SBC: down $1.18 to $28.32, Research, Estimates) and AT&T (T: down $0.35 to $9.27, Research, Estimates).
Markets rose earlier in the session after first-quarter GDP growth was revised upward to a 6.1 percent annual rate in May from an early estimate of 5.6 percent. The GDP growth represents the strongest showing in two years.
In corporate news, Sun Microsystems (SUNW: up $0.32 to $5.03, Research, Estimates) traded higher following a note out of Goldman Sachs saying that the company is making good progress towards achieving its fourth-quarter target of sequential revenue growth.
Lehman Bros. upgraded shares of a number of chipmakers, including Micron Technology (MU: up $0.93 to $19.93, Research, Estimates) to "strong buy" from "buy," and Conexant (CNXT: up $0.27 to $1.36, Research, Estimates) to "buy" from "market perform," citing good valuation. But Lehman also cut its 2002 and 2003 earnings per share estimates on chip leader Intel (INTC: down $0.56 to $18.05, Research, Estimates), citing a slowing demand, particularly in Europe.
Motorola (MOT: up $0.12 to $14.16, Research, Estimates) traded up despite offering some mixed news. The wireless equipment manufacturer said it will cut 7,000 additional jobs and take $3.5 billion in restructuring charges. However, the company also reaffirmed its second quarter and full-year guidance.
Also on Wednesday, the Federal Reserve Board opted to keep interest rates at 1.75 percent, a 40-year low.
In other economic news, the number of Americans filing new weekly claims for unemployment dropped last week to 388,000 from 398,000 the previous week, the Labor Department said. The number is a little below estimates and is still beneath the key 400,000 rate that would imply weakness in the job market.
"The market has so far been ignoring the good economic news, but it's just a matter of time before investors shake off the fear factor," Cardillo said.
Treasurys fell in early trade, pushing the yield on the 10-year note up to 4.78 percent.
In global trade, European bourses rose at midday, while Asian markets closed broadly higher. The dollar was little changed versus the yen and euro. Brent crude oil futures rose 22 cents to $25.46 in London trade. Gold fell $3.10 to $317.70 an ounce.
Market breadth was mixed. On the New York Stock Exchange, advancers topped decliners as 573 million shares changed hands. On the Nasdaq, losers beat winners as 689 million shares traded.