Fear Stalks Wall Street Again

Updated from 4:15 p.m. EST

Stocks took a beating Tuesday as investors couldn't shake corporate accounting jitters, and solid earnings from Wal-Mart ( WMT) failed to lure buyers.

The Dow Jones Industrial Average finished down 159 points, or 1.6%, to 9744. The Nasdaq closed down 55 points, or 3%, to 1750, and the S&P 500 lost 21 points, or 1.9%, at 1083.

Among the companies stoking the accounting fires Tuesday were IBM ( IBM), which pledged more clarity in its financial statements; Nvidia ( NVDA), which disclosed a Securities and Exchange Commission probe last week; and Pharmaceutical Resources ( PRX), which said it would restate its results back to 1998 on the SEC's advice. IBM and Nvidia ended lower, but Pharmaceutical Resources tacked on a modest gain.

Long weekends often yield merger news, and the Presidents Day holiday in the U.S. was no exception. Optical-networking company Ciena ( CIEN) set plans to acquire rival ONI Systems ( ONIS) in a $900 million all-stock deal as it attempts to gain market share. Ciena finished off 28 cents to $8.45, while ONI was added 8.2% to $5.94.

Wal-Mart was under pressure after the company posted a fourth-quarter profit of $2.19 billion, or 49 cents a share, meeting analysts' forecasts. The company earned $2 billion, or 45 cents a share, last year. Sales for the quarter rose 13.5% to $64.21 billion, with same-store sales rising nearly 7%. Wal-Mart expects same-store sales to rise 5% to 7% in the first quarter and said that fiscal 2003 earnings would meet or slightly exceed current projections. The company's shares lost 74 cents to $59.29.

In the financial services sector, J.P. Morgan Chase ( JPM) traded down $1.02, or 3.4%, to $29.03. On Friday, a lawsuit was filed alleging the investment bank didn't fully disclose its exposure to bankrupt energy trader Enron. Moody's reaffirmed its ratings on J.P. Morgan in response to numerous inquiries into the company's credit status.

Travelocity.com ( TVLY) soared after the company received a $23-a-share buyout bid from majority owner Sabre Holdings ( TSG). Sabre holds a 70% stake in the online travel agency. Following the announcement, shares of Travelocity jumped nearly 30% to close well above the tender price at $24.91.

Consumer electronics retailer Circuit City ( CC) saw its shares plummet $4.29, or 16.3%, to $22.11 after an analyst said the company's remodeling initiative could cost more than forecast. Others speculated the company was under pressure because of negative perceptions about credit card security.

UAL ( UAL), the parent company of United Airlines, was climbing after the company said it reached a tentative agreement with the mechanics union, averting a potential strike. Shares traded up $1.59, or 14%, to close at $12.95

AES ( AES) was one of the day's biggest losers, falling 32.1% to $4.75, following the company's decision to fully contract or divest its merchant generation business, which is expected to bring in $1 billion.

Analysts at Credit Suisse First Boston downgraded Boeing ( BA) to a buy rating from a strong buy, citing the stock's valuation. The firm maintained its $50 price target on the airplane manufacturer. Elsewhere, J.P. Morgan raised its rating on Comverse Technology ( CMVT) to buy from long-term buy.

The economic calendar was almost empty, but before the bell, the Census Bureau said housing starts rose to an annualized rate of 1.678 million units in January, topping the consensus estimate of 1.595 million. Building permits increased to 1.706 million, higher than the 1.600 million forecast.

U.S. Treasury issues were lower, with the 10-year note down 4/32 to 100, yielding 4.87%.

Overseas stocks were lower, with London's FTSE 100 down 1.2% to 5093 and Germany's Xetra Dax off 2.2% at 4764. In Japan, the Nikkei 225 closed down 2.4% to 9847. Hong Kong's Hang Seng fell 1.5% to 10,840.

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