Enron Troubles, Uncertainty Send Stocks Tumbling

Stocks tumbled Wednesday amid investors’ nagging uncertainty about the economy and as energy giant Enron headed toward financial collapse. Meanwhile, Treasury bond yields were little changed. After sliding early in the session, they rebounded after the government got a tepid reception for a record sale of two-year notes.

On Wall Street, the Dow industrials slid 160.74 points, or 1.6%, to 9,711.86. The market was in a steady decline most of the session.

The tech-dominated Nasdaq composite suffered a 2.5% decline, off 48 points to 1,887.97.

Losers topped winners by about 2 to 1 on the New York Stock Exchange and on Nasdaq.

Early in the week the market seemed poised to retake the 10,000 level on the Dow and the 2,000 level on the Nasdaq index. Instead, sellers have gained the upper hand.

Analysts noted that many investors aren’t convinced the economy will improve in the first half of 2002. For weeks, hopes that business will improve early next year have been boosting the market.

“We’re not out of the woods yet” with the economy, said Richard Jandrainof Banc One Investment Advisors Corp.

The Federal Reserve’s latest report on conditions by region, released Wednesday, painted a generally somber picture of the economy.

Still, many analysts said stocks’ sell-off this week doesn’t appear to be anything special.

“The reality is, we were due for some pullback,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

Hyman and other analysts were actually pleased to see investors take a cautious step back after fearing that the market was rising too much and too quickly.

The market’s softness was spread across most sectors, but one of the weakest spots was utilities, which dropped after Dynegy backed out of its planned merger with Enron.

NYSE-listed Enron broke the record for heaviest trading in a single day with more than 339 million shares changing hands, as it fell $3.50 to 61 cents. The previous volume record was the 304 million shares of Intel traded on Nasdaq on Sept. 22, 2000.

Investors were selling most utility stocks Wednesday. The Dow utilities average fell 2.9% to a 52-week low of 279.95.

Financial stocks were slammed on worries about spillover from an Enron collapse. J.P. Morgan Chase sank $2.30 to $37.50, and Citigroup dropped $2.75 to $47.80. Both are in the Dow.

Retailing issues remained vulnerable to concerns that this holiday shopping season will be the worst in a decade. Gap stumbled 79 cents to $13.61 after Prudential Securities reduced its rating on the clothier to “sell” from “hold” and called its holiday merchandise poor. Electronics retailer Best Buy fell $1.18 to $69.90, and Bed, Bath & Beyond declined 74 cents to $32.34.

Technology also was weaker as investors fear there is still too much inventory and not enough demand. Chip equipment maker Altera fell $1.83 to $21.83 ahead of its update on business in the fourth quarter. After the market closed, Altera reaffirmed its revenue projections for the year’s final three months.

IBM, another Dow stock, dropped $2.05 to $112.15 after announcing it will cut 1,000 jobs from its seven U.S. chip plants because of a slowdown in the microprocessor industry.

What was bad for stocks normally would be good for bonds, but that wasn’t the case by the close of trading Wednesday.

Yields fell early in the day, then reversed after the government’s biggest sale ever of two-year notes flooded the market with debt.

The Treasury sold $21 billion of the two-year notes at a yield of 3%, up from $19 billion sold in October, part of an effort by the government to finance a spending increase using short-dated debt.

The five-year T-note yield ended unchanged at 4.29%. The 10-year T-note ended at 4.93%, up from 4.92%.