Closing Market Report

Star-Bulletin news services

Tuesday, January 29, 2002

Consumer confidence
improved but stocks fall

By Lisa Singhania
Associated Press

NEW YORK >> Stocks fell sharply today, sending the Dow Jones industrials down more than 160 points despite better-than-expected consumer confidence numbers that suggested business conditions are improving.

Analysts said already jittery investors were unnerved by published reports questioning accounting practices at Tyco and across the corporate world. Wall Street was also focused on the beginning of a two-day Federal Reserve meeting.

By early afternoon, the Dow was down 168.14 at 9,697.61. The Standard & Poor's 500 index was off 2.63 at 1,110.43, while the Nasdaq composite index lost 43.45 to 1,900.46.

Decliners led advancers 2 to 1 on the New York Stock Exchange. Volume was 942.90 million shares vs. 648.08 million at the same point yesterday.

The Russell 2000 index slipped 7.59 to 473.69.

Treasury bond prices were mostly higher at midday.

The price of the Treasury's 10-year note was unchanged and yielded 5.07 percent, also unchanged. The 30-year bonds were down 532 point and yielded 5.48 percent, up from 5.47 percent yesterday.

Two-year Treasury notes were up 116 point and yielded 3.13 percent, down from 3.17 percent yesterday.

"On the heels of this Enron situation, people are very concerned about accounting practices," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "People get concerned that we may have some other companies pulling shenanigans like Enron. People don't want to own them ... and that's undermining confidence."

The day had started out on a more positive note.

The Conference Board reported that consumer confidence improved for the second straight month in January, helped by increased optimism about jobs and the economy. The report is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.

Also, the Commerce Department said orders to U.S. factories for durable goods rose a bigger-than-expected 2 percent in December, suggesting better days may be ahead for the nation's battered manufacturing sector.

But the news wasn't enough to cheer investors, who are still waiting for corporations to say their businesses have turned the corner.

Tyco, a conglomerate in several businesses that recently announced plans to split up, tumbled $6.69 to $35.31. The selling intensified on a Wall Street Journal report that the company had paid $20 million to one of its outside directors and a charity he controls for advice on a merger.

Analysts said the market's nervousness extended to General Electric, which also operates in a variety of industries. GE dropped $1.45 to $36.70.

Richard A. Dickson, technical analyst at Hilliard Lyons, said the Enron debacle has made many investors uneasy about complicated corporate structures. Enron, which has filed for bankruptcy, is under investigation for its accounting practices. He also said investors don't have a strong reason to buy right now.

"There are a lot of things out there that people kind of look at and say, 'Maybe we better just sit on the sidelines or take money out of the market,"' he said. "The psychology is very negative right now."

Also today, ChevronTexaco tumbled $3.16 to $85.71 after reporting a fourth-quarter loss of $2.5 billion and reducing the projected value of some holdings. Williams Cos. lost $6.33 to $17.81 on concerns about the energy trader and pipeline's business and fallout from the Enron situation.

IBM also contributed to the Dow's decline, sliding $3.64 to $104.51 on word its board had elected Samuel Palmisano as new CEO to replace Louis Gerstner. Gerstner, who is retiring, had hinted last year that Palmisano would succeed him.

Investors were also waiting for the outcome of the two-day Federal Reserve's Open Market Committee meeting. Although few expect another interest rate cut, traders want to hear what the agency will have to say tomorrow about the economy's direction.

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