- The Washington Times - Monday, June 12, 2006


A decline in stocks yesterday sent the Standard & Poor’s 500 Index to its lowest point since November after the seventh Federal Reserve official in as many days warned inflation is too high.

Federal Bank of Cleveland President Sandra Pianalto, in a speech to a meeting of broadcasters in Orlando, said inflation exceeds her “comfort level.”

Lehman Brothers posted its biggest drop in three years and energy shares declined with oil prices. The Nasdaq Composite Index fell, increasing its loss for the year to 5.2 percent, after Monster Worldwide and other Nasdaq companies began stock-options investigations.

The S&P; 500 fell 15.90, or 1.3 percent, to 1236.40, erasing its gain for the year and falling to the lowest since Nov. 16. The Nasdaq declined 43.74, or 2.1 percent, to 2091.32. The Dow Jones Industrial Average lost 99.34, or 0.9 percent, to 10,792.58.

The Russell 2000 Index of smaller companies declined 2.6 percent to 683.19.

More than nine stocks fell for every one than rose on the New York Stock Exchange, the worst such ratio in eight months.

The Nasdaq has dropped 11.8 percent from its high set on April 19, nearly twice the loss by the S&P; 500 from its five-year high set during the first week in May.

“What you have is a lot of people afraid that this is overkill,” said Richard Hoey, chief economist and investment strategist at Dreyfus. Investors are “too pessimistic about what’s going to happen in the future.”

Lehman slumped even after second-quarter profit exceeded analysts’ estimates. Lehman reported profit of $1.69 a share in the three months ended May 31. Shares fell $3.60 to $62.01.

Merrill Lynch tumbled $2.45 to $68.62. Goldman Sachs declined $4.89 to $145.

Energy stocks slid with the price of oil and contributed the most to the S&P; 500’s decline. July crude fell 1.8 percent to $70.36 a barrel on the New York Mercantile Exchange. Exxon Mobil fell 56 cents to $58.24. Schlumberger fell $2.64 to $56.58.

A widening options scandal weighed on Monster and Comverse Technology.

Monster slid $3.40, or 8.1 percent, to $38.60. The company said a committee of independent directors is investigating options grant methods. Monster often gave options to top officials ahead of jumps in its share price, a trend that raises concerns about whether the grants were backdated, the Wall Street Journal said, citing information from the company’s government filings.

Comverse slumped $3.09, or 13 percent, to $20.48. The company said a special committee is reviewing its option grants and it cannot file its first-quarter earnings or its 2006 annual report until that review is complete.

General Motors Corp., the world’s largest automaker, rose 43 cents to $25.78 on optimism the United Auto Workers union may be prepared to make some concessions.

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