Stocks Dive as Investors Recoil
Software stocks, energy traders, blue-chip issues--all took a beating amid a general retreat on Wall Street on Monday.
Catalysts for the selling included news that Tyco International Chief Executive L. Dennis Kozlowski resigned amid a criminal probe into possible tax evasion, new disclosures of sham transactions by energy traders and worries about war between India and Pakistan.
The S&P; 500 index dropped 26.46 points, or 2.5%, to 1,040.68, its lowest point since Oct. 1 and its steepest one-day slide since Jan. 29. Tyco, down $5.90 to $16.05, and its larger rival General Electric, off $1.03 to $30.11, contributed 9% of the S&P;’s decline.
The Dow Jones industrial average plunged 215.46 points, or 2.2%, to 9,709.79, the lowest since Feb. 7. Only two of the Dow’s 30 stocks, AT&T; and Procter & Gamble, rose. The sell-off accelerated in the final hour of trading, which analysts attributed to the Dow having broken below the 9,800 level and triggering programmed selling.
The Nasdaq composite index fell 53.17 points, or 3.3%, to 1,562.56.
The Russell 2000 index of smaller stocks fell 13.08, or 2.7%, to 474.39 as small-company shares, which had been one of the market’s few strong sectors, continued to give up ground.
Losers swamped winners by more than 2 to 1 on the New York Stock Exchange and Nasdaq in moderate trading.
The S&P; 500 has lost 9.3% this year after dropping the previous two years. The benchmark hasn’t had three straight annual declines since 1939-1941. All three benchmark stock indexes have fallen for five sessions out of the last six.
Stocks fell Monday even after an industry report showed U.S. manufacturing expanded in May at the fastest pace in more than two years. The Institute for Supply Management’s factory index rose to 55.7 last month from 53.9 in April. It was the fourth straight month with a reading above 50, which indicates expansion.
Since Enron’s collapse, investors have grown increasingly concerned that companies are using accounting practices to inflate earnings or hide debts. Stocks also have been hurt by rising tensions between nuclear-armed neighbors India and Pakistan and continued violence in the Middle East.
“There’s a lot of stuff bubbling, and much of it is sinister,” said Mace Blicksilver, a money manager for Marblehead Asset Management.
Williams, owner of the second-biggest U.S. gas pipeline, slid $3.25, or 23%, to $10.95. California may ask federal regulators to probe allegations that the company tried to corner the state’s gas market during last year’s energy crisis.
El Paso fell $3.70 to $21.95. The largest U.S. natural-gas pipeline owner said Treasurer Charles Dana Rice committed suicide Sunday. The company last week cut its 2002 earnings forecast, halved the number of energy-trading jobs and said it plans to sell $1.5 billion in stock to support its credit rating and reduce debt. El Paso’s shares are down more than 50% this year.
Software stocks tumbled after Lehman Bros. analyst Neil Herman reported there are no signs of a pickup in the software industry and said the stocks probably will be “dead money” for at least the next two quarters. He cut his ratings on six stocks, including BEA Systems, which fell $1.12 to $9.64, and Veritas Software, which lost $1.65 to $21.02.
Microsoft, the biggest software company, dropped $1.49 to $49.42. The Goldman Sachs software index fell 4.3%.
The dollar fell for a fourth day in five against the euro and yen on concern that foreign investors are souring on U.S. markets.
Against a basket of currencies, the dollar has lost almost 6% of its value so far this quarter, falling a record four straight months against the euro.
The greenback fell to 123.80 yen Monday, down from 124.38 Friday. The euro rose to 93.8 cents from 93.1 cents Friday.
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Market Roundup, C8-9
