Accounting fears prompt selloff

Accounting fears prompt selloff

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Associated Press

NEW YORK (AP) – News that a congressional investigation of Enron could spread to Wall Street put investors in a sour mood Tuesday and sent stocks tumbling.

By early afternoon, the Dow Jones industrial average was off 107.87, or 1.1 percent, at 9,795.17.

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indicators also fell. The Nasdaq composite index was off 49.24, or 2.7 percent, at 1,755.96, and the Standard & Poor’s 500 index was down 16.43, or 1.5 percent, at 1,087.75.

Worries about the fallout from Enron’s collapse hit the market anew after The New York Times reported Tuesday that congressional investigators would widen their probe to Wall Street firms and their role in Enron’s finances.

Specifically, the report said, the investigators would examine how financial companies structured and sold the limited partnerships at the center of the Enron investigation, and also why Wall Street firms were issuing recommendations to buy Enron stock even when they had information about the company’s troubled financial situation.

Concerns that other major firms might reveal shaky finances have strained the stock market in recent weeks, and helped bring the Dow down 99 points on Friday, cutting short what had been a solid rally earlier in the week.

“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.”

IBM dropped $3.89 to $99 despite news that the company would release more details about its bookkeeping in response to investor concerns about greater disclosure. IBM fell Friday following a report that called into question some of the company’s accounting procedures.

Financial stocks also languished, including J.P. Morgan, down 92 cents at $29.13, and Citigroup, off $1.25 at $42.88. 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 $5.60 to $24.80 after Sabre Holdings announced before the market opened it would acquire the remaining stake in the online travel company. Sabre, which already owns 70 percent of Travelocity.com, was down $1.94 at $43.34.

United Airlines’ parent company, UAL, rose $1.48 to $12.84 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, another indication that the housing market is thriving despite the sluggish economy.

Declining issues outnumbered advancers 2 to 1 on the New York Stock Exchange, where volume came to 625.09 million shares, compared with 754.23 million at the same point Friday. Stock markets were closed Monday for the Presidents Day holiday.

The Russell 2000 index was off 7.41 at 461.84.

Overseas, Japan’s Nikkei stock average fell 2.4 percent. In Europe, Germany’s DAX index was down 1.7 percent, Britain’s FT-SE 100 was down 1.2 percent, and France’s CAC-40 was down 2.1 percent.

Copyright 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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