- The Washington Times - Wednesday, February 6, 2002

NEW YORK (AP) Wall Street's hope for a rebound fizzled yesterday, with investors drawn to the stock market's relatively cheap prices but hesitant amid continuing questions about accounting practices. Stocks fluctuated throughout the session before closing modestly lower.
Analysts said investors were held back by fears that other companies might be vulnerable to bookkeeping scandals like Enron's. News that Congress was unlikely to pass an economic-stimulus package made investing an even tougher sell.
"It's extremely tentative out there," said Hugh Johnson, chief investment officer at First Albany Corp. "This Enron thing has done some real damage to investor confidence."
The Dow Jones Industrial Average closed down 1.66 at 9,685.43, extending a two-session, 232-point losing streak.
Broader stock indicators showed slightly larger declines. The Standard & Poor's 500 Index lost 4.42, or 0.4 percent, to 1,090.02, and the Nasdaq Composite Index slipped 17.01, or 0.9 percent, to 1,838.52.
The selling was in line with what so far has been a disappointing year for the market. Stock prices have been drifting consistently lower as investors try to reconcile mostly weak earnings forecasts with their hope of a speedy recovery. Those doubts have been exacerbated by the Enron debacle, which has made investors nervous about trusting the reliability of corporate bookkeeping in general.
In trading yesterday, Reliant Resources slid $1.87, or 13.5 percent, to $11.95 on word it was restating its earnings for the second and third quarters of 2001 and postponing release of its fourth-quarter results because of internal-accounting errors with certain gas and power transactions. Its parent company, Reliant Energy, fell $1.98, or 8 percent, to $22.94.
Tyco tumbled $6.80, or 22.7 percent, to $23.10, building on a sell-off that began last week on fears the conglomerate's financial statements didn't reflect the true health of the business. The losses grew Monday with a Wall Street Journal report that Tyco had spent about $8 billion in the past three fiscal years on more than 700 acquisitions never announced to the public. Two credit-rating agencies also downgraded some of the company's debt.
"This is kind of an Enron hangover," said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray. "The market is in the process of trying to determine the difference between accounting that meets regulations and accounting that's fraudulent."
Investors also sold Ciena after the optical networker reduced forecasts for the first fiscal quarter, cut 400 jobs and said second-quarter sales would be flat or down. Ciena dropped $1.12 cents to $9, a loss of 11 percent.
General Electric, a Dow component, fared better, recovering some of its loss from Monday's broad sell-off. The stock rose $1.21 to $36.21, after GE reaffirmed its expectations for profit growth this year.
Honeywell also benefited from bargain hunting, climbing 69 cents to $32.76.
But overall, the market's mood was gloomy. Stocks did manage a brief bump up in the afternoon, but that evaporated when Senate Majority Leader Tom Daschle, South Dakota Democrat, indicated an economic-stimulus package likely would be shelved for lack of votes. Many had hoped the measure could help the nation out of recession.
Mr. Johnson, the First Albany strategist, said it is important to remember that, at its core, the market's downturn reflects fundamental doubts about stock prices and the market's performance going ahead.
Stocks rose sharply during the last three months of 2001 on a rebound from the post-terror attack sell-off and optimism about the future. But the market's upbeat mood has dissipated although economic data have improved steadily, most corporations have yet to say business is strengthening.
Also yesterday, Federal Reserve Chairman Alan Greenspan testified before the Senate Banking Committee, but his topic was financial literacy, not the markets or economy.

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