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November 22, 2002



Stocks Careen to 1997 Lows Amid Accounting Worries

Major US stock gauges slammed to lows unseen since 1997 on Wednesday after Qwest Communications International Inc. inflamed worries over corporate accounting and Standard & Poor's booted a handful of companies from its prestigious index.

"There are no buyers and that's a proxy for a major lack of confidence in U.S. companies," said Gary Wedbush, head of trading at Wedbush Morgan Securities.

Wall Street has suffered three straight days of deep declines. The market has been on a mostly downward spiral as blow-ups like WorldCom Inc.'s US$3.85 billion accounting scandal, fears of another terror attack on the United States and apprehension over the upcoming quarterly earnings season rattle the market.

Qwest lost almost one-third of its value after federal prosecutors launched an unspecified criminal probe into the No. 4 U.S. local phone company. The latest in a string of high-profile investigations into Corporate America dealt another stinging blow to investor confidence.

Royal Dutch slumped nearly 10 percent after the Anglo-Dutch oil group and six other foreign firms were yanked from the S&P 500 index to be replaced with seven U.S. companies. Money managers dumped the foreign shares to make room for the new members of the benchmark index.

Selling intensified as the closing bell approached. The S&P 500 skidded 32.36 points, or 3.40 percent, to 920.47, based on the latest available numbers, hitting its lowest level since October 1997.

The blue-chip Dow Jones industrial average tumbled 282.59 points, or 3.11 percent, to 8,813.50 -- its largest one-day percentage loss since September 2001. The technology-loaded Nasdaq Composite index sank 35.11 points, or 2.54 percent, to 1,346.01, ending at its lowest level since May 1997.

"The mood is relatively sullen," said Jack Schwetje, a senior equities trader at Deutsche Bank. "All the up moves have been sold. It hasn't made much sense to get involved over the last couple of weeks."

Losers trounced winners by a ratio of about 3 to 1 on the New York Stock Exchange and about 2 to 1 on Nasdaq. More than 1.78 billion shares changed hands on the Big Board and more than 1.79 billion on Nasdaq in active trading.

The market has suffered a staggering loss of nearly US$7 trillion since hitting an all-time high on March 24, 2000 -- reflecting a 40 percent tumble in the Wilshire Total Market Index. The total U.S. stock market is now valued at about US$10.4 trillion.

Yahoo! Inc. emerged as a bright spot after a dismal session by snapping a string of six consecutive quarterly losses. The Internet media company after the bell posted a second-quarter profit and higher revenues, with the help of new fees on services. Yahoo ticked up to US$12.54 in after-hours trade after ending down 51 cents at US$12.19.

During regular hours, Qwest tumbled 83 cents to US$1.77. Qwest, the dominant local phone company in 14 states from Minnesota to Washington, said it was not told the subject of the criminal probe by the U.S. Attorney's office in Denver. A Qwest spokesman declined to comment on whether investigators have asked the company for any documents.

Stock-market index compiler S&P sent seven foreign companies reeling after saying it would yank them from its S&P 500 index to create a U.S.-based benchmark. Royal Dutch fell US$5.16 to US$50.73. Consumer products giant Unilever lost US$4.15 to US$60.97. Canadian firms Nortel Networks, Alcan, Barrick Gold, Placer Dome and Inco also slumped on news of their impending exit.

S&P said it would replace the foreign companies with seven U.S. firms, including United Parcel Service ; Electronic Arts Inc. ; Ebay Inc. ; Goldman Sachs Group Inc. ; Prudential Financial Inc. ; Principal Financial Group Inc. ; and SunGard Data Systems Inc. . All those stocks rose.

Accounting concerns spread to the White House. A public interest group sued Vice President Dick Cheney and the oil services company he once ran, Halliburton Co., alleging they defrauded shareholders by overstating the company's revenues. Halliburton shares fell 57 cents to US$13.55.

The civil lawsuit was filed in federal court one day after President Bush went to Wall Street to outline proposals aimed at stopping the accounting scandals that have shaken investor faith in U.S. financial markets.

Auto makers added more pressure to the market. General Motors Corp., the world's largest auto maker and a Dow component, lost US$3.53 to US$47.61, and rival Ford Motor Co. dropped US$1.12 to US$13.99. Banc of America cut the car giants to "market perform" from "buy" due to concerns over competitive industry pricing.

Pharmaceutical giant Merck & Co. slumped US$2.18 to US$43.57. The Dow component delayed the US$980 million public sale of its Medco Health Solutions Inc. pharmacy unit for a third time, as turbulent markets sapped investor demand for new shares.

Cisco Systems Inc., up 37 cents at US$13.51, emerged as a bright spot in a solemn market. Merrill Lynch raised the rating on the Web gear giant to "strong buy" from "buy," saying it expected an imminent turnaround in the network equipment sector.

(China Daily July 11, 2002)

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