NEW YORK – Stocks tumbled Monday amid fears that more companies may have Enron-type accounting bombshells in store, with shares of companies ranging from conglomerates Tyco and GE to drug maker Elan caught in the sell-off.
Monday's declines wiped out $300 billion in market value, as measured by a 2.34 percent drop in the broad Wilshire 5000 index.
The blue-chip Dow Jones industrial average tumbled 220.17 points, or 2.22 percent, to 9,687.09 -- its lowest close since Jan. 29. The Nasdaq Composite Index fell 55.71 points, or 2.91 percent, to 1,855.53. That was the technology-laced index's lowest finish since Nov. 12. The broader Standard & Poor's 500 Index lost 27.76 points, or 2.47 percent, to 1,094.44 -- its lowest close since Nov. 2.
"These accounting worries go right to the underpinnings of trust and confidence. If trust isn't there, you're tugging at the loose thread of a cheap polyester suit," said Douglas Altabef, a fund manager for Matrix Asset Advisors, which oversees $800 million. "People are worried about what other shoes are getting ready to drop."
Tyco International Ltd. , the Big Board's most active stock, sank after the conglomerate said it spent around $8 billion on more than 700 acquisitions that were never publicly announced. Tyco's stock this year has been hammered by worries it didn't account properly for its acquisitions, and other companies with complicated financial structures -- like General Electric Co. -- have been caught in the maelstrom.
Wall Street is grappling with a crisis of confidence after accounting problems at energy trading giant Enron Corp.led to its record collapse and sent investors back to corporate books in search of other possible problems.
"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 market place."
Investors dumped shares of drugmaker Elan Corp. and network equipment maker Enterasys Networks Inc. after the companies said revenues would disappoint.
Telecommunications stocks slid on worries a recent rash of bankruptcies will snowball. Shares of gold and retail drug firms climbed as investors sought a safe haven amid widespread jitters about financial irregularities. Gold producer Newmont Mining Corp. rose $1.09 to $23.90, while national drugstore chain Walgreen Co. advanced $1.32 to $36.86.
In the latest chapter in the Enron story, former Enron Chairman and Chief Executive Officer Kenneth Lay abruptly canceled his planned testimony before Congress this week, due to what his attorney called an increasingly "prosecutorial" climate.
Enron filed for bankruptcy in early December. An inquiry has found the energy trader inflated profits by $1 billion. Enron shares fell 5 cents to 35 cents.
General Electric, a diversified conglomerate whose operations range from financial services to aerospace and appliances, dropped $1.85 to $35 as investors dumped shares of companies with a long history of mergers and acquisitions, and complex accounting methods.
"GE is an excellent company that has been forthright for years about what they do. But it is a very complex company, not a one-product company everyone can understand," said Brian Pears, head of equity trading at Victory Capital Management. "It makes sense people might take shots at GE."
Tyco skidded $6.96 to $29.90. S&P cut several ratings for the firm and its Tyco Capital Corp. finance arm, saying the company appears to have lost the "free access to capital markets" enjoyed by "single-A" companies. At the same time, S&P said the conglomerate has answered questions about its accounting practices "to Standard & Poor's satisfaction."
Enterasys plunged 61 percent after the network equipment maker said it is under investigation by the Securities and Exchange Commission and warned of disappointing quarterly revenues. Shares sank $6.60 to $4.20.
"It seems like no matter what newspaper you read, no matter what television channel you turn on, it's all we can talk about: 'Who might be hiding what?"' Pears said.
Elan Corp. plunged $15.10 to $14.85 after the Irish drug firm warned revenue growth this year would be lower than expected. The news followed a share decline last week on worries about the firm's accounting practices. The stock was the second-most active NYSE stock after Tyco.
"This is an unmitigated disaster -- we think when investors get through the details, you'll find out shenanigans have accounted for the majority of Elan's earnings," said David Maris of investment bank Credit Suisse First Boston.
Telecom stocks fell sharply as fears over the industry's health intensified on the heels of a bankruptcy filing by Global Crossing Ltd. . WorldCom Inc. fell $1.48 to $8.13 and Williams Communications Group Inc. fell 42 cents to $1.
Standard & Poor's late Friday warned it may cut high-speed communications network operator Williams's credit ratings.
Global Crossing is facing an investigation of its accounting methods by the Securities and Exchange Commission, and WorldCom continues to face pressure amid concerns about its debt ratings.
WorldCom was the most active stock traded on Nasdaq.
Global Crossing, which has declared bankruptcy, last traded at 9.2 cents last week.
Shares of top defense contractors moved higher following the Bush administration's request for the largest increase in military spending in 21 years, although such issues had rallied recently in anticipation of the news.
Lockheed Martin Corp. gained 87 cents to $53.30 and Northrop Grumman Corp. added 18 cents to $109.98.
Only two stocks of the 30 in the Dow average gained, and almost 22 stocks fell for every nine that rose on the New York Stock Exchange. About 26 stocks dropped for every 9 that gained on the Nasdaq stock market. Volume came to 1.42 billion shares, more than the 1.38 billion reported Friday.
The Russell 2000 index lost 9.95 to 470.09.
Overseas, Japan's Nikkei stock average lost 1.6 percent. In Europe, Germany's DAX index slid nearly 2.0 percent, Britain's FT-SE 100 dropped 0.4 percent, and France's CAC-40 was down 1.3 percent.
Reuters and the Associated Press contributed to this report.