Enron Inspires Wall Street Skeptics
A mood of mistrust has settled over Wall Street as cautious investors looked long and hard at corporate accounting in an attempt to avoid sinking their dollars into the next Enron-type bankruptcy.
The markets waded through another disappointing session Wednesday, dropping for the fourth straight day as the ripple effects of the Enron collapse continued.
The Dow Jones industrial average closed down 32.04 while the technology-focused Nasdaq composite index suffered a more significant loss, falling 25.79, or 1.4 percent.
"This is still a skeptical market, so it's going to be a struggle to rally," said Larry Wachtel, market analyst at Prudential Securities.
Indeed, The Enron accounting scandal has fueled doubts about bookkeeping at Tyco International Ltd. and other companies, and has made Wall Street question the validity of earnings reports in general. Those fears have exacerbated concerns that stock prices are too high, given the murky forecast for earnings and the failure of most companies to say that business has turned around.
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Tyco International Ltd. Wednesday emphatically rebutted concerns that it might be the next Enron.
In a conference call with investors and reporters, Chief Executive Dennis Kozlowski tackled those fears head on.
"We have an absolutely terrific company here that is very well financed, that is liquid, highly liquid. ... It has no comparisons to any failed company out there at all in terms of products, culture, secret financing arrangements, management, anything like that," he said.
Tyco shares rebounded strongly after hitting 52-week lows Monday and Tuesday.
Wall Street spent much of the sessin waiting for quarterly results from Cisco Systems, which were due out after the market closed. A company memo released Tuesday suggested those numbers would beat expectations, causing the stock to rise 11 cents to $18.61. But investors were still waiting to get the exact figures, as well as the company's assessment of what future business might look like.
A bullish outlook from Cisco could help improve the market's mood, but analysts say investors have become extremely risk-averse, and it will take more than one cheery forecast to ease their fears.
"I think the market will care to a degree what Cisco says, but people have had such huge losses in tech stocks that they really don't trust a lot of things that these companies say," said Larry Rice, chief investment officer at Fahnestock & Co. "Someone's always going to say how did they get to those numbers? What math did they do to beat expectations?"
Indeed, investors have been waiting for months for some kind of catalyst to convince them that now is the time to buy. Many had expected upbeat corporate forecasts in January to provide a spark; when those outlooks failed to materialize, stocks fell back.
"The monsters have been earnings disappointments, terrorists, now accounting," said Scott Vergin, a fund manager for the Lutheran Brotherhood, a money management firm in Minneapolis. "In this environment, it's easy to lose ground and hard to make it up so you try and prevent disasters" by being cautious.
Calpine fell $1.95 to $6.80 on news the company received a letter from the Securities and Exchange Commission on Dec. 20 regarding a review of its disclosure practices.
Technology stocks were particularly vulnerable, with Intel dropping 88 cents to $32.92 and Microsoft losing 70 cents to $60.45.
Also Wednesday, the Labor Department reported Wednesday worker productivity in the last three months of 2001 rose by the largest amount in more than a year as businesses cut workers' hours and eliminated jobs to cope with the ailing economy. Wall Street showed little reaction to the news, however, because the information concerns past, not current or future events.
The Dow Jones closed at 9,655.46, its lowest close since Jan. 29.
Almost two stocks fell for every one that rose on the Nasdaq Stock Market, while decliners trounced advancers by a ratio of 19 to 11 on the Big Board.
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