Daschle helps the market down: lead news on SI home:Stocks Fall on Stimulus Bill's Death
Feb 5 4:37pm ET
By Chelsea Emery
siliconinvestor.com
NEW YORK (Reuters) - Stocks slipped on Tuesday after a swift late-day drop on word Washington's economic stimulus legislation is all but dead, and poor profit forecasts by Sprint Corp. and other telecommunications firms.
"There is too much out there that is very questionable, and the stimulus package is gone," said Ned Collins, head of trading at Daiwa Securities America. "It is really difficult to get someone out there to buy stocks right now. People are cynical and suspicious."
Gold stocks surged on the back of higher gold prices as investors looked for a safe haven amid persistent worries about the honesty of Corporate America's earnings, after accounting problems led to the collapse of energy trading giant Enron Corp. .
Investors again dumped shares of conglomerate Tyco International Ltd. on jitters about its complex financial structure. Tyco was the most-active Big Board stock for the seventh straight session and tumbled 23 percent.
The technology-laced Nasdaq Composite Index <.IXIC> dropped 17.01 points, or 0.92 percent, to 1,838.52, while the blue-chip Dow Jones industrial average <.DJI> dipped 1.66 points, or 0.02 percent, to 9,685.43.
The broad Standard & Poor's 500 Index <.SPX> shed 4.42 points, or 0.40 percent, to 1,090.02. But gold stocks, such as Barrick Gold and Newmont Mining , which climbed 3.7 percent and 4.9 percent respectively, limited declines. The S&P gold index <.GSPGOLD> jumped 3.76 percent, reflecting gold's status as the best-performing sector as gold climbed to an 18-month high of $299.80 an ounce.
Market indexes had crawled into positive territory in mid-afternoon trading, but gave up gains after Senate Majority Leader Tom Daschle said he expected an economic stimulus package to fail key procedural votes this week.
Investors' concern over the telecom industry's health intensified after Sprint, the No. 3 U.S. long-distance telephone company, and its wireless unit Sprint PCS Group reported quarterly losses and cut their outlooks for the full year 2002.
Sprint lost $2.19 to $13.83. The shares of its wireless unit Sprint PCS sank $2.76 to $10.99, off from its three-year low of $10.40.
"These companies keep coming out with lowered guidance because the build-out (in products and services) is 100 times bigger than what demand warrants -- they're fighting for a limited amount of contracts," said Robert Arancio, head of Nasdaq trading for Lehman Brothers. Other traders said telecommunication companies' high debt levels also worried Wall Street.
Ciena Corp lost $1.12 to $9. The optical networking firm said it would report a wider quarterly loss than analysts had expected, citing spending cutbacks by major customers.
The disappointments follow the bankruptcy filing from high-speed communications network operator Global Crossing Ltd. last week and recent bad news from WorldCom Inc. and Williams Communications Group Inc. .
WorldCom fell $1.16 to $6.97, also an all-time low, and topped the list of Nasdaq's most actives. Williams Communications dropped 14 cents to 86 cents. The American Stock Exchange's North American Telecom index <.XTC> fell 5.3 percent.
Conglomerate General Electric Co. reassured some investors after saying its profits would be in line with forecasts. Shares rose $1.21 to $36.21, after the company reiterated its first-quarter earnings guidance, saying profits would be in line with Wall Street targets.
GE also touted its financial controls as "second to none" a day after its stock was battered on concerns the diversified conglomerate could be the next corporate titan to face questions about its accounting.
Tyco continued its slide a day after Standard and Poor's downgraded the conglomerate's debt. Tyco's stock plunged $6.80 to $23.10, and was the most-active stock on the New York Stock Exchange, with more than 133 million shares traded.
Questions about its accounting and corporate ethics, and skepticism over its plan to split into four parts, have haunted the stock in recent weeks.
"People should be concerned if they own a stock with accounting issues," said Alex Motola, a fund manager for Thornburg Investment Management, which oversees $5 billion. "If there's one cockroach, there's always another one."
Perhaps the biggest issue dogging Wall Street is the accounting stringency that is going to follow the Enron debacle, said Morgan Stanley strategist Byron Wien, as accountants are going to have to be tougher on companies, and that is likely to have a negative effect on earnings.
"Lax accounting standards are going to be called into question," Wien told clients in a note. "The U.S. stock market is based on investors' trust in accountants, analysts, and corporations themselves, and that trust is in question now."
Wall Street pored over a mixed bag of economic reports. One report showed a key index measuring the vast U.S. services sector of the economy retreated slightly in January, casting some doubts on hopes the world's largest economy, which is mired in recession, will swiftly rebound.
Another government report showed U.S. orders for manufactured goods rose in December, boosted by transportation and military equipment, adding to recent signs the worst of the recession may be past.
"It's pointing to recovery, there's a no escaping that, but the market is caught with this Enronitis virus and ignores the economic numbers," said Peter Cardillo, chief strategist at Global Partners Securities Inc. "Until the negative news on Enron subsides, we will be in a volatile market." |
