Investor Jitters Send Stocks Down Again
Stocks closed lower Tuesday, losing ground late in the day on news that Washington’s economic stimulus legislation is all but dead, and poor profit forecasts by Sprint and other telecom firms.
“There is too much out there that is very questionable, and the stimulus package is gone,” said Ned Collins, head of trading at Daiwa Securities America. “It is really difficult to get someone to buy stocks right now. People are cynical and suspicious.”
The Nasdaq composite index dropped 17.01 points, or 0.9%, to 1,838.52, while the Dow Jones industrial average dipped 1.66 points, virtually unchanged, to 9,685.43.
The Standard & Poor’s 500 index shed 4.42 points, or 0.4%, to 1,090.02. Gold stocks, such as Newmont Mining, limited declines as gold climbed to an 18-month high of $298.20 an ounce.
Losers led winners by 3 to 2 on Nasdaq and the New York Stock Exchange. Trading was heavy.
Market indexes had crawled into positive territory in midafternoon trading, but gave up gains after Senate Majority Leader Tom Daschle (D-S.D.) said he expected an economic stimulus package to fail key procedural votes this week.
Investors again dumped shares of conglomerate Tyco International on jitters about its complex financial structure. Tyco was the most-active Big Board stock for the seventh straight session and tumbled 23%.
A new accounting-related concern emerged when Reliant Resources, the power-producing and trading arm of Reliant Energy, fell 13% after saying it will restate last year’s results after it mistakenly accounted for electricity and natural gas transactions.
The accounting crackdown likely to follow the Enron debacle is a major issue facing Wall Street, said Morgan Stanley strategist Byron Wien. Accountants are going to have to be tougher, and that could have a negative effect on earnings, he said.
“Lax accounting standards are going to be called into question,” Wien told clients in a note. “The U.S. stock market is based on investors’ trust in accountants, analysts and corporations themselves, and that trust is in question now.”
Investors’ concern over the telecom industry’s health intensified after Sprint, the No. 3 U.S. long-distance telephone company, and its wireless unit Sprint PCS Group reported quarterly losses and cut their outlooks for the full year 2002. Sprint lost $2.18 to $13.83 and Sprint PCS sank $2.77 to $10.99.
The economic news Tuesday was mixed. A key index measuring the services sector of the economy retreated slightly in January, casting some doubts on hopes the U.S. economy, which is mired in recession, will swiftly rebound.
Another report showed orders for manufactured goods rose in December, boosted by transportation and military equipment, adding to recent signs the worst of the recession may be past.
“It’s pointing to recovery, there’s no escaping that. But the market is caught with this Enronitis virus and ignores the economic numbers,” said Peter Cardillo of Global Partners Securities.
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In other market news:
* The yen fell sharply Tuesday, at one point losing 1.5% against the dollar as investors grew increasingly pessimistic on Japan’s economic and political outlook. An 18-year low for Tokyo’s Nikkei 225 index combined with negative news on Japan’s banking and insurance sector from two key U.S. credit ratings agencies contributed to the yen’s tumble. The currency closed at 133.86 to the dollar.
* Ciena lost $1.12 to $9. The optical networking firm said it would report a wider quarterly loss than analysts had expected, citing spending cutbacks by major customers.
* WorldCom fell $1.16 to $6.97, an all-time low, and topped the list of Nasdaq’s most actives. The Amex telecom index fell 5.3%.
* General Electric reassured some investors after saying its profit would be in line with forecasts. GE rose $1.21 to $36.21 after the company reiterated its first-quarter earnings guidance, saying profit would be in line with Wall Street targets.
