Enron Effect Scuttles Stocks

New questions about accounting practices at Tyco and Enron provoked a broad selloff on Wall Street Monday as investors grew more doubtful about the honesty of corporate bookkeeping in general.

The Dow Jones industrial average fell 220.17 points, or 2.22 percent, to 9,687.06. The Nasdaq composite tumbled 55.72 points, or 2.92 percent, to 1,855.52. The benchmark Standard & Poor's 500 dropped 27.76 points, or 2.47 percent, to 1,094.44.

A good deal of investor anxiety was centered on Tyco International, which dropped $6.96, or 19 percent, to $29.90 on reports that it spent about $8 billion in the past three fiscal years on more than 700 acquisitions that were never announced to the public.

"You can't believe financial statements," said Mace Blicksilver, a money manager at Marblehead Asset Management. "It's not like just a bad quarter or an earnings miss - you're re-evaluating the entire price-to-earnings ratio of the marketplace."

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Amid increasing questions about Enron's accounting and leadership, investors have become skeptical about the accuracy of corporate reports and bookkeeping — and fearful that more companies are in worse shape than their results suggest.

A report issued over the weekend suggested that Enron deliberately misrepresented its financial condition worsened Wall Street's mood, as did former chairman Ken Lay's decision not to testify Monday before a congressional panel.

Investors also sent Williams Cos. down $2.64, or 14 percent, to $16.36 after the company said it is prepared to sell more assets and issue more stock to keep its credit rating. In the last week or so, questions have been raised about Williams' obligations to its former telecom subsidiary, the Williams Communication Group, which is facing financial problems. Williams Communications lost 42 cents to $1.

The selling spead to companies that are not under particular scrutiny. General Electric, another conglomerate with a complex accounting structure, dropped $1.85 to $35.00.

Financial stocks were weak, too, reflecting concerns that their lending practices would make them vulnerable should companies start revising balance sheets. American Express lost $1.68 to $33.42.

Among tech issues, Ciena dropped $1.88 to $10.12 on worries the optical networking industry will take a while to recover. The sector is considered to be overpriced by some, making it more vulnerable to selling when investors are worried about future returns.

"I think it's become more of a 'Sell now, ask questions later' market until people feel more confident about earnings," said Tom Galvin, chief investment officer at Credit Suisse First Boston.

Declining issues led advancers more than 2 to 1 on the New York Stock Exchange. Volume came to 1.42 billion shares, more than the 1.38 billion reported Friday.

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