Nasdaq drops to 5-year low

By Adam Shell
USA Today

NEW YORK — Mounting concerns about accounting scandals, the health of American businesses and sinking stock prices swept aside seemingly good economic news yesterday, as the Nasdaq composite tumbled to a five-year low.

The Nasdaq, dominated by battered technology stocks, became the first major U.S. stock index to close below its post-Sept. 11 lows. On the heels of its worst six-month start to a year, the index fell 4 percent to 1,404, well below its Sept. 21 low of 1,423 and its worst close since June 1997.

The slide delivered another blow to investor confidence, which has fallen sharply as accounting scandals at WorldCom and a host of other once high-profile companies have caused President Bush to say that such corporate misdeeds must be punished.

"There's tremendous risk in individual companies, because you don't know who has an accounting problem and who the Securities and Exchange Commission is going to investigate next," says Mark Minervini, a hedge fund manager at Firsthand Fund.

The increasingly pessimistic outlook was obvious in a USA Today/CNN/Gallup poll conducted June 28-30. In general, the 1,019 adults polled said, they are deeply troubled by skidding stock prices and the surge in corporate malfeasance. Key findings:

• 52 percent think the economy is in recession, vs. 45 percent in early May; 33 percent said economic conditions are "poor."
• 57 percent said scandals, such as those enveloping WorldCom, ImClone and Enron, are a "major problem" for the nation; 34 percent said they expect "many more" examples of financial misconduct in the next year.
• 58 percent said they are "less likely" to invest in stocks because of the recent scandals; 64 percent said stocks' recent swoon also makes them "less likely" to invest.
• 67 percent, said the stock markets' recent slump makes them feel "less confident" about the U.S. economy, up sharply from 51 percent in mid-March.
• 49 percent, said the market's weakness makes them feel "less confident" about their financial situation.