NEW YORK >> Concerns about Merck's accounting practices cut short Wall Street's rally today, sending the Dow Jones industrials down more than 100 points and technology stocks sharply lower. Profit-taking halts rally
Merck joins the string of corporations
pegged for questionable accounting practicesBy Lisa Singhania
Associated PressAnalysts weren't too concerned, however, suggesting many investors were simply locking in profits from Friday's big advance. Even with the session's decline, the market held most of its gains.
Advancing issues led declining issues 8 to 7 on the New York Stock Exchange, but the reverse was true on the Nasdaq Stock Market, where decliners led advancers 2 to 1. NYSE volume was 1.16 billion shares, compared with 708.72 million shares Friday. Trading ended early Friday because of the July 4 holiday weekend.
The Dow Jones industrial average closed down 104.60, or 1.1 percent, today at 9,274.90. The average had risen 324 points Friday.
Broader stock measures also retreated. The most significant losses came in the technology-focused Nasdaq composite index, which fell 42.74, or 3.0 percent, to 1,405.62. The Standard & Poor's 500 index was down 12.05, or 1.2 percent, at 976.98. The Russell 2000 index fell 7.31 to 433.61.
The Nasdaq gained 68.19 on Friday, while the S&P advanced 35.04.
The price of the Treasury's 10-year note was up 15/32 point today, while its yield fell to 4.79 percent from 4.86 percent late Friday. Two-year Treasury notes were up 1/8 point and yielded 2.79 percent, down from 2.89 percent late Friday.
"We got just a little bit ahead of ourselves on Friday, so to get a little bit of pullback today is normal," said Ralph Acampora, director of technical research, Prudential Securities. We're trying to digest those gains, stabilize and then mount a rally."
Still, some of the selling reflected the same problems that have dogged the market for weeks. A Wall Street Journal story questioning Merck's accounting practices sent the pharmaceutical company's stock down as investors yet again wondered about the truthfulness of corporate earnings reports. Merck, which denied any wrongdoing, fell $1.05 to $47.81. Meanwhile, Merrill Lynch downgraded the stock, citing the possibility of a delay in the planned spinoff of its Merck Medco unit.
Alcoa dropped 88 cents to $32.50 on quarterly results that missed expectations, despite its first sequential revenue increase in more than a year.
Investors also sold the technology sector lower. Texas Instruments lost 83 cents to $24.15, while Dell slid $1.24 to $24.75. Bellwether IBM dropped $2.20 to $71.30.
Retailers were mixed. Wal-Mart fell 40 cents to $55.60. Sears, Roebuck advanced 44 cents to $52.57.
Although the market hung on to most of its gains from Friday's big rally, its failure to extend the advance was in keeping with recent trading patterns. Stocks have been falling since mid-May on doubts that earnings will be strong enough to justify stock prices. And the recent string of corporate bookkeeping scandals at companies ranging from Global Crossing to WorldCom have given investors more reasons to pull back.
Second-quarter earnings reports are expected later this month, but until then stocks will have few catalysts outside of corporate news stories like Merck's. That might not be a bad thing, however. Many analysts believe the market could use a rest.
"What we need is not so much good news, as a week without more bad news," said Michael Murphy, head trader at Wachovia Securities. "Buyers have been paralyzed, and we're going to have see their confidence in the market restored to move up."
Overseas, Japan's Nikkei stock average dropped 0.5 percent. In Europe, Germany's DAX index fell 0.9 percent, Britain's FTSE 100 slipped 0.3 percent, and France's CAC-40 lost 0.1 percent.