- The Washington Times - Wednesday, July 24, 2002

Drops in energy and financial stocks yesterday drove the Standard & Poor's 500 index below 800 for the first time in more than five years.
Fallout from Enron's collapse drove down shares of its main lenders and former rivals. Citigroup and J.P. Morgan Chase each tumbled more than 15 percent as they disputed congressional assertions that they helped Enron hide debt from rating agencies and investors.
Dynegy, which once offered to buy the now-bankrupt Enron, plunged after lowering a cash-flow forecast as much as 40 percent. Six other energy traders lost more than one-fifth their value.
Stocks may keep declining until "we get away from the daily pronouncements of corruption and bad news coming out of companies," said Charles White, president of Avatar Associates, which has increased to 40 percent, from 30 percent last month, the portion of its assets in cash.
The S&P; 500 slid 22 points, or 2.7 percent, to 798, the lowest close since May 1, 1997. The blue-chip index has lost 31 percent this year in its biggest drop since 1937. It is down 46 percent from its peak in March 2000 nearly as much as its 48 percent loss in the 1973-74 bear market.
Reflecting a renewed slide in technology stocks, the Nasdaq Composite Index had its biggest one-day loss since October. It fell 54 points, or 4.2 percent, to 1229.
The Dow Jones Industrial Average shed 82 points, or 1.1 percent, to 7702, erasing an advance of 110 points. Gains in 3M and Johnson & Johnson limited the drop.
The drubbing in U.S. markets was only outdone by European bourses, where nearly double-digit declines in the past two days sent the dollar climbing back over parity with the euro to 98.87 cents.
Investors are more fearful about stocks than at any time since the market's 1987 crash, according to a Chicago Board Options Exchange's Volatility Index.
"It's very hard to convince people to stop selling, let alone buy stocks," said Kim Arthur, director of equity marketing at Banc of America Securities. "There is so much damage right now."
In the third-busiest day on the New York Stock Exchange, with more than 2.4 billion shares trading hands, almost five stocks fell for every one that rose.
Investors are shifting to bonds. The yield on the benchmark two-year Treasury note fell to 2.29 percent, the lowest since the government began regular sales of the securities in 1972.
Citigroup, hit for a second day by a congressional inquiry, fell $5.04 to $27, a three-year low, capping a 25 percent drop this week. J.P. Morgan slid $4.44 to $20.08, the lowest price since January 1996.
Lawmakers said the banks took some of the financing packages Enron used and marketed them to other corporations. The so-called prepay transactions helped Enron make debt look like cash flow and contributed to the collapse of the energy trader.
Congressional scrutiny of the banks "does nothing to restore investor confidence," said Tim Stevenson, a senior portfolio manager at Evergreen Investment Management.
Dynegy fell $2.15, or 64 percent, to $1.23. The energy trader, down 96 percent this year, canceled a $325 million bond sale after Standard & Poor's cut the company's credit rating to "junk."
Other natural-gas companies fell in sympathy. Mirant slid $1.28 to $2.77; Williams tumbled 82 cents to $1.19; Calpine shed 96 cents to $3.12; El Paso lost $3.15 to $10.40.
Dynegy and Williams are the S&P; 500's biggest losers this year, dropping more than 90 percent amid revelations of sham trading transactions and accounting investigations.
General Electric declined 86 cents, to $24.80. The biggest maker of power-plant equipment plans to cut 2,500 jobs at its Power Systems unit during the next nine months as sales of large turbines and other generators fall.
Telephone stocks slid after SBC Communications said profit this year will trail forecasts. The second-biggest U.S. local-telephone company said earnings fell 11 percent last quarter. Its shares fell 66 cents, to $23.30.
BellSouth dropped $1.31, to $21.30. Verizon Communications shed $1.22, to $27.43. AT&T; fell 72 cents, to $8.80, after reporting a record $12.7 billion loss on the write-down of the value of its cable-television assets.
Lucent Technologies plunged 45 cents, to $1.65. The biggest U.S. maker of telephone equipment said its loss widened and sales tumbled, prompting 7,000 job cuts.
Clear Channel Communications dropped $4.94, to $25. The largest owner of U.S. radio stations said Randy Michaels was removed as chief executive of the radio division.
3M rose $2.76, to $111.76. The maker of dental products and respirators reported yesterday that second-quarter earnings doubled.
Johnson & Johnson rose $1.55, to $44.08; the drug and medical-device maker was off 16 percent Friday.
Gillette advanced $1.91, to $30.91. The world's largest razor maker said profits rose 27 percent in the second quarter on higher sales and lower costs. Procter & Gamble, the biggest U.S. household products maker, rose $1.38, to $79.21.
Black & Decker jumped $3.54, to $40.37. The largest maker of U.S. power tools expects 2002 earnings to exceed forecasts. The company reported second-quarter profit that topped estimates as increased television advertising and rebates boosted sales.
This article is based in part on wire service reports.

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