Wall Street ended a volatile day mixed, as the blue-chip Dow Jones recovered its nerve to close virtually unchanged after a late-session sell-off on news that authorities had turned their attention to the links of banks Citigroup and JP Morgan with disgraced energy trader Enron.
Jittery investors knocked more than 200 points off the leading index after the report that the US Securities and Exchange Commission was looking at both companies' behaviour. But the market came back to post a small loss of 4.92 points (0.06 per cent) on 8,186.37 at the close. The Nasdaq, however, slid 50.09 points (3.88 per cent) to 1,240.14 as technology stocks fell, reversing most of a big rally a day earlier, as a bleak outlook from a major computer chip company bashed semiconductors and weak economic data dampened sentiment.
Earlier, European stocks ended a four-session slide with a broad bounce from five-year lows led by insurers and telecoms, on the back of the Dow's 6 per cent-plus rise at the close on Wednesday. But poor outlooks from tech leaders were a reminder that economic recovery has more work to do.
Valuations have become more attractive after Europe's 13 per cent drop in the prior four sessions, but fund managers warned about calling a floor in the market. "It's too soon to tell if it's a fundamental change or just a blip in a continuous downward trend," said Mr Alia Baig, head of European equities at AXA IM fund in London.
In Dublin, the ISEQ finished up 2.25 per cent, with banks accounting for the bulk of the gains.
"The pendulum swung too far yesterday so we got more than we were entitled to, so there's some profit taking," said Mr Bill Yancey, manager of equity trading at SWS Securities in Dallas. "And overall there is no real upbeat news to indicate to us that we have reached the bottom."
The market made a wobbly start after the government reported durable goods orders fell 3.8 per cent in June, far worse than expectations for a 0.7 per cent rise. The report cast doubt on the strength of the recovery and investors wondered whether the market's stellar gains meant the worst was over for a stock market plunged to five-year lows.
Tech stocks were dragged down after Taiwan Semiconductor, the world's largest contract chip-maker, posted weaker-than-expected quarterly profits and surprised investors by forecasting things would get worse in the July-September period. The stock fell $2.06, or 18.5 per cent, to $9.08 and the damage spread to many leading issues in the computer industry. "There's nothing positive coming out on the techs. Earnings season was pretty negative, and they're paying the price, giving up what they gained quickly," said Mr Joseph Dorilio, head of trading at investment firm ING Financial Markets.
Trading volumes were extremely heavy, with more than 2.4 billion shares traded on the New York Stock Exchange and almost as many on Nasdaq. It was one of the heaviest trading days in the Big Board's 200-plus year history. Five of the NYSE's top 10 busiest days had occurred either this week or last, an exchange spokeswoman said.
Investors were concerned about murky accounting. All eyes were on AOL Time Warner, down more than 15 per cent, after the media giant said the SEC had opened an inquiry into accounting practices of its online division.
Blue-chips swung in and out of positive territory in a morning of volatile and heavy trading, bolstered by gains in battered stocks like JP Morgan Chase and Citigroup. But both reversed course as the day went on and news spread of the SEC inquiry into Enron links. The euro ended ahead of the dollar as the two currencies danced around parity throughout the day. In late New York trade, the euro stood at $1.0024. - (Reuters)
