S&P; 500 Hits Lowest Since ’98

Wall Street’s bears knocked over another milestone Tuesday, driving the blue-chip Standard & Poor’s 500 index below its post- terrorist-attacks closing low in a second day of heavy selling.

Investors continued to dump technology shares, but they also targeted many of the stock sectors that had been among this year’s better performers. Fears over accounting scandals and possible new terrorist attacks made for a grim mood overall.

The S&P; 500 slid 20.56 points, or 2.1%, to 948.09, the lowest close since Jan. 12, 1998. The index easily fell through its Sept. 21 closing low of 965.80--which many investors hoped had marked the end of the bear market that began in March 2000.

The Nasdaq composite index also sank further, tumbling 45.98 points, or 3.3%, to 1,357.82, a five-year low. Nasdaq broke through its Sept. 21 low on Monday.

The Dow industrials dropped 102.04 points, or 1.1%, to 9,007.75.

Losers swamped winners by 25 to 8 on the New York Stock Exchange and by 26 to 9 on Nasdaq.

Trading volume was heavy, though Nasdaq’s total again was inflated by huge volume in WorldCom, shares of which rose 4 cents, to 10 cents.

Investors’ collective sentiment was damaged anew last week, when WorldCom revealed that it had understated expenses by $3.9 billion over the last five quarters. Already reeling from a host of corporate scandals this year, many investors now have no appetite for equities, analysts say.

Instead, “the path of least resistance is to sell,” Philip Orlando, chief investment officer at Value Line Asset Management, told Bloomberg News.

Accounting worries were fanned Tuesday by reports that entertainment giant Vivendi Universal may have sought to pad its books in 2001. Vivendi’s U.S.-traded shares dived $4.69, to $17.76.

Investors dumped many other stocks that have suffered from rumors about possible accounting issues, including AOL Time Warner, down 99 cents to $12.52, and power companies such as Dynegy, down 46 cents to $6.24. The Dow Jones utility stock index fell 2.3% to 262.90, its lowest since 1998.

Sellers also hammered some of the stock groups that had held up well for much of this year, such as smaller and mid-size stocks. The S&P; small-cap stock index fell 3.3%; the S&P; mid-cap index lost nearly 3%.

Shares of home builders, HMOs, gold miners and real estate investment trusts also were broadly lower. They had been among this year’s leaders.

Some analysts said the dumping of recent leaders could indicate that the latest selling wave is nearing an end. Investors often wait to sell their best-performing stocks last.

Richard McCabe, an analyst at Merrill Lynch, said the market was “very, very oversold”--meaning prices have been falling so sharply, and for such an extended period, that a bounce is overdue simply for technical reasons.

He expects stocks to rebound for two to three months, then slump again in the fall.

Many analysts still are holding out hope that investors will respond positively to what are expected to be upbeat second-quarter earnings reports from many companies, thanks to the economy’s recovery in the quarter.

But the damage to investor psychology from the corporate scandals could be deep and long-lasting, some analysts warn.

“The question is whether we have a crisis of confidence or a contraction of confidence. Judging from the fact that the market is hardly acting as a magnet for money right now, I think it’s fair to say that it could trade lower still,” said Alan Ackerman, executive vice president at Fahnestock & Co.

In other trading Tuesday, the dollar took back some ground against the euro, after European Union reports showed that consumer and business confidence had waned. The euro closed at 98.4 cents, down from 98.8 cents Monday.

Among Tuesday’s highlights:

* Computer chip stocks slumped after analysts at Morgan Stanley and Salomon Smith Barney lowered forecasts for industry growth. Intel, the largest maker of semiconductors, slid to its lowest since June 1998, declining 97 cents to $16.57.

Other losers included National Semiconductor, down $4.58 to $22.75; International Rectifier, down $1.03 to $25.58; and Micron Technology, off 76 cents to $19.24.

* Among other tech names, Cisco Systems fell 53 cents to $12.56, Oracle dropped 32 cents to $8.68, and Computer Sciences was off $1.23 to $40.45.

* Among utilities, American Electric Power fell $1.11 to $38.48 and PG&E; dropped $1.17 to $16.18.

* Home builders’ shares slumped after rallying Monday. Pulte Homes lost $2.97 to $54.97, Centex slid $3.56 to $54.54, and KB Home dropped $2.67 to $49.83.

* In the gold sector, Barrick Gold fell 74 cents to $18.44 and GoldCorp lost 95 cents to $9.90 as near-term gold futures eased $1.20 to $312.80 an ounce, the lowest since mid-May.

* Among real estate investment trusts, Boston Properties fell 62 cents to $39.25 and Duke Realty was off 65 cents to $27.40.

* On the plus side, some classic “defensive” stocks gained. Philip Morris added 74 cents to $45.70 and Anheuser-Busch rose 90 cents to $51.20.

* European stock markets were broadly lower. The main German share index tumbled 3.9%; the French index lost 4.2%, dragged down by Vivendi.

Market Roundup, C6-7