The frantic rush by energy merchants to raise cash has left the market shuddering.

Shares of two energy traders dipped sharply Tuesday, even as the companies trumpeted their success in generating needed greenbacks. The entire sector was awash in red as confidence in its downtrodden players continued to crumble.

Aquila

(ILA)

, a Kansas City-based utility, sought to soothe the market with news of a $37.5 million asset sale. But at the same time, the company reminded investors that it's attempting to sell an additional $1 billion worth of "nonstrategic" assets, reminding Wall Street just how steep a hill the company has yet to climb.

Meanwhile, Standard & Poor's expressed concern over Aquila's plans to buy -- rather than sell -- a major asset. S&P placed Aquila's debt on negative credit watch, primarily because of the company's planned acquisition of Cogentrix Energy, an independent power producer with more than 30 power plants.

"Managing the acquisition process and integrating the Cogentrix assets will offer challenges to Aquila at a time when the energy and capital market conditions are exerting added pressure on the company's creditworthiness," said S&P analyst Todd Shipman.

S&P has assigned Aquila a low investment-grade rating of BBB, pushing the stock down 68 cents, to $7.32.

Also, Atlanta-based

Mirant

(MIR)

, which announced the completion of a $370 million convertible debt offering, neared a 52-week low, shedding 23 cents to hit $5.88. The company's stock slid more than 10% Monday after Mirant set plans for the offering, which could dilute current shareholders down the road.¿

But

Williams

(WMB) - Get Report

once again fielded the industry's harshest punishment. After wrapping up a horrible second quarter, the Tulsa energy trader saw its stock punch through the $5 level, pushing into what some observers call penny stock territory. The stock was down 75 cents, to $4.91, as the afternoon began. Williams stock is fresh off a 75% second-quarter loss, making it the eighth-worst performer on the

New York Stock Exchange

.

Tuesday's tumble came after S&P placed a Williams subsidiary on negative credit watch over concerns about the parent. S&P assigned the subsidiary, Transcontinental Gas Pipeline, a BBB rating.

"The negative outlook reflects the view that management will face execution risk in its goal of reducing leverage," said S&P analyst Jeffrey Wolinsky. "If substantial progress toward the goal has not been made by year-end 2002, the ratings could fall by one notch."

S&P listed as particular concerns Williams' weakened cash-flow quality, risks associated with its trading operations and "significant cash-flow exposure" to future power prices due to a lack of hedging.

Other energy merchants down sharply on the day included

El Paso

(EP)

, down $1.45, to $18.40;

Dynegy

(DYN)

, down 53 cents, to $6.17; and

AES

(AES) - Get Report

, down 47 cents, to $4.14.