Stocks tumble in broad selloff
By Lisa Singhania
|Anthony Corso, right center, conducted trading in shares of beleaguered and tumbling Tyco on the New York Stock Exchange floor yesterday.
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 is expected to decide today whether to issue a subpoena.
Tyco tumbled $6.96, or nearly 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 its 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 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.
"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.