Dow plummets on concerns over widening Enron probe
NEW YORK — Concerns over a widening congressional investigation of Enron further soured the market's mood Tuesday and sent stocks tumbling. The selloff pulled the Dow Jones industrials down more than 150 points and sent the Nasdaq composite index to its lowest close this year.
The market has now given back nearly all its gains from this month's big rally. Analysts said investors, doubtful that the economic recovery will be as quick and strong as they had hoped, didn't want to risk losing profits as the Enron fallout continues.
The Dow closed down 157.90, or 1.6 percent, at 9,745.14, the lowest finish since Feb. 7, when the index closed at 9,625.44.
The technology-based Nasdaq tumbled 54.59, or 3 percent, to 1,750.61, its worst showing since Nov. 2, when it fell to 1,745.73. The Standard & Poor's 500 index lost 20.84, or 1.9 percent, to 1,083.34.
Yesterday's losses appeared linked to selling that began Friday on reports about IBM's accounting. A New York Times story yesterday about Enron reminded Wall Street that congressional investigators are widening their probe of the energy trader to include investment firms.
The story squelched investors' hopes that the fallout from Enron might soon dissipate.
"This is another excuse to sell in an environment where pessimism has been built up now for two years," said Charles G. Crane, strategist for Victory SBSF Capital Management. "Investors are extremely disgruntled right now. They are thinking they would rather sell into strength than buy into weakness."
Stocks have been trading in a narrow range since the beginning of the year, alternating between losses and gains on questions about earnings and the integrity of corporate bookkeeping. With most corporations still unable to say resolutely that business is improving, investors are finding few reasons to buy.
IBM dropped $3.35 to $99.54 despite news that the company would release more details about its accounting in response to investor concerns about greater disclosure.
Financial stocks also languished, including J.P. Morgan, down $1.02 at $29.03, and Citigroup, off $1.99 at $42.22. Analysts said investors were worried that the institutions would be hurt if the economic recovery turns out to be mild instead of robust.
The few bright spots reflected company-specific news, rather than broader industry moves. Travelocity.com surged $5.71, or nearly 30 percent, to $24.91 after Sabre Holdings announced before the market opened that it would acquire the remaining stake in the online travel company. Sabre, which already owns 70 percent of Travelocity, was down $2.34 at $42.94.
United Airlines' parent company, UAL, rose $1.59 to $12.95 after the airline reached a tentative contract agreement with the union representing its mechanics and aircraft cleaners, averting a potentially crippling strike.
Also Monday, the Commerce Department reported construction of new homes and apartments rose 6.3 percent in January to the highest level in almost two years, the latest indication that the sluggish economy might be reviving.
Still, most analysts agree Wall Street wants to see more concrete, upbeat forecasts from big companies before getting too excited about any recovery. The big concern now is that the economic turnaround will be muted and unable to inspire the kind of earnings growth investors have been anticipating.
"Even though the economy seems to be getting better, you're still not hearing people call for a robust recovery," said
UBS Warburg's Robert Harrington. "The market is in a holding pattern and investors are nervous."
Harrington cautioned, though, that until people regain their faith in the integrity of earnings, it will be difficult for stocks to rally.
"We need some earnings growth, but we need those earnings to be reported properly," he said. "That's the bigger issue right now."
Declining issues outnumbered advancers 2 to 1 on the New York Stock Exchange. Consolidated volume was light, coming to 1.48 billion shares, compared with 1.68 billion Friday. Stock markets were closed Monday for the Presidents Day holiday.