- NEW YORK (Reuters)
- Wall Street began the third quarter on a dour note on Monday, with the
Nasdaq composite index dropping to a five-year low as the multibillion-dollar
accounting scandal surrounding former high-flying phone company WorldCom
Inc. WCOME.O deepened.
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- The Nasdaq .IXIC dropped through the Sept. 21 low it
touched after the attacks on the United States, and kept falling to close
at a level unseen since June 10, 1997.
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- Wall Street's accounting woes, along with jitters about
political turmoil overseas and worries that the July 4 holiday may bring
another attack on the United States, prompted investors to shy away.
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- "People are nervous about July 4th, the next WorldCom
... just pick your poison," said Donna Van Vlack, director of trading
at Brandywine Asset Management. "It's darn hairy out there."
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- A surprisingly strong forecast from 3M Co. MMM.N did
little to underpin confidence as investors stayed on the sidelines in a
shortened trading week. Major stock markets will be closed on Thursday
for the July 4 holiday and close early on Friday.
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- "It's called a bear market," said Dan McMahon,
head of block trading for CIBC World Markets. "The concerns are that
the economic recovery is not as robust as people had hoped for and there's
still a huge cloud of pessimism over accounting issues. People are waiting
for the other shoe to drop. It's also a holiday week so volatility is exacerbated."
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- The technology-laced Nasdaq Composite Index .IXIC was
down 59.45 points, or 4.06 percent, at 1,403.76, according to the latest
available figures. That was its lowest close since June 10, 1997, when
the index closed at 1,401.60. Last Sept. 21, the index closed at 1,423.19.
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- The Dow Jones industrial average .DJI was down 133.47
points, or 1.44 percent, at 9,109.79. The broader Standard & Poor's
500 Index .SPX was down 21.17 points, or 2.14 percent, at 968.64.
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- Breadth was negative, with about two stocks falling for
every one that gained on Nasdaq and the New York Stock Exchange. About
2.97 billion shares traded on Nasdaq, with trading in WorldCom contributing
about half of that volume. About 1.42 billion shares changed hands on the
Big Board.
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- WorldCom, which said it faces delisting from the Nasdaq
on July 5 and received notice it has defaulted on some loans, fell 93 percent,
or 77 cents, to 6 cents.
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- More than 1.5 billion shares of WorldCom were traded,
breaking the Nasdaq's record for most shares traded in an individual issue
on a single day -- last broken by WorldCom itself in May.
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- Trading had been halted since last week after WorldCom's
admission that it did not properly account for $3.85 billion in expenses.
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- The telecoms firm also said its audit committee is reviewing
its financial records for 1999 through 2001.
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- "It's just a question of what industry is the next
one to get a major hit," said Adam Tracy, head of listed trading at
Thomas Weisel Partners. "Accounting really worries a lot of people."
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- Computer services company EDS Corp. EDS.N slumped 18
percent after it said it expects WorldCom, an important customer, to account
for $160 million to $175 million of EDS revenue and 3 cents to 4 cents
of EDS earnings per share in both the third and fourth quarters.
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- Separately, EDS said it ended talks with consumer products
giant Procter & Gamble Co. PG.N related to a potential contract said
to be worth about $1 billion.
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- EDS fell $6.70, or 18 percent, to $30.45. Procter &
Gamble gained 73 cents to $90.03.
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- Diversified manufacturer 3M helped limit losses in the
blue-chip Dow index with a gain of $4.40, or 3.6 percent, to $127.40 after
saying second-quarter earnings will be higher than expected due to improved
sales.
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- Johnson & Johnson JNJ.N and partner Alkermes Inc.
ALKS.O took a hit after the U.S. Food and Drug Administration rejected
their bid to market a long-acting, injectable version of the lucrative
schizophrenia treatment Risperdal, the companies said. Johnson & Johnson
fell $1.76 to $50.50, while Alkermes lost 68 percent, down $10.86 at $5.15.
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- Biotech shares like Alkermes were a major drag on the
Nasdaq market. The Nasdaq biotechnology index .NBI fell nearly 9 percent.
Sector leader Amgen Inc. AMGN.O was down $3.52, or 8 percent, to $38.36.
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- One bright spot, though, was Tyco International Ltd.
TYC.N , which topped the list of the New York Stock Exchange's most actively
traded stocks. Investors were betting the public share sale of CIT, Tyco's
finance arm, would help the cash-strapped company meet its urgent debt
payments. Tyco closed up 24 cents to $13.75. After the bell, Tyco raised
a less-than-expected $4.6 billion from the sale of CIT.
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- Investment bank Merrill Lynch also fanned investors'
worries after it cut its year-end targets for the S&P 500, reflecting
lower expectations for corporate earnings. Merrill cut its S&P 500
target to 1,050 points from 1,200.
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- Trading volumes are expected to thin as investors slip
out to begin their July 4 holiday.
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- "By the time you get to Wednesday, everybody will
be sliding out," said Larry Wachtel, market analyst at Prudential
Securities. "The following week, when the second-quarter earnings
actually start to arrive -- that's the moment of truth for the market,
but this is really kind of a throw-away week."
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