Stocks Tumble on a Tide of Bad News

Negative developments for IBM and Merck dragged down the Dow. Investor disappointment with Yahoo prompted selling of techs

Stocks plunged on Thursday to finish solidly lower, as blue chips got hammered amid rumors the Securities and Exchange Commission is investigating IBM (IBM ). Techs, meanwhile, also ended down after Yahoo! (YHOO ) posted lackluster results.

The Dow Jones industrial average tumbled 205.65 points, or 1.98%, to 10,176.08. The Nasdaq Composite index dropped 41.78 points, or 2.36%, to 1,725.29. And the broader Standard & Poor's 500 index, meanwhile, was down 26.96 points, or 2.39%, to 1,103.51.

Regarding the SEC rumors, IBM told S&P it's not part of company policy to comment on government relations. IBM shares lost more than 5% in Thursday's session. The SEC talk was the second major blow to Big Blue's stock this week. On Monday, the shares plunged after IBM said it expects to report earnings per share of $0.66 to $0.70, vs. earlier estimates of $0.85 for the first quarter.

In addition to IBM, General Electric (GE ) was another big Dow loser after the diversified giant reported first quarter earnings per share of $0.35 (before accounting changes), vs. $0.30 one year earlier, on flat revenue. The company also hosted its first-ever quarterly earnings conference call. GE stock lost more than 9%.

Dow components AT&T (T ) and Merck (MRK ) fell to multi-year lows, amid weakness in the telecom sector and news that the drug giant's arthritis compound Vioxx will have to carry a warning that the medicine poses higher cardiovascular risks than a standard arthritic treatment.

And bad news among blue-chips was just the beginning. In technology, Yahoo! posted $0.02 first quarter EPS (on a GAAP basis) vs. a $0.02 loss on a 6.9% revenue rise. It was the Internet media company's sixth straight quarterly loss. The company also said it sees second quarter revenue of $205 million to $225 million, and $870 million to $910 million for 2002. S&P maintained its hold rating on the stock, while Merrill cut its near term rating to neutral from buy.

One bright spot: Discount retailing giant Wal-Mart Stores (WMT ) raised its guidance for first-quarter same-store sales after reporting a 9.5% increase in March at its stores open at least a year.

Meanwhile, the SEC said on Thursday that Xerox (XRX ) will pay a $10 million penalty to settle SEC charges it allegedly schemed to defraud investors.

And on the new issues front, Wall Street was anticipating the initial public offering of discount airline JetBlue. The offering was expected to price late Thursday. S&P sees JetBlue debuting at $25-$26 per share, giving the company an initial market capitalization of about $1.0 to $1.1 billion.

Treasury Market

U.S. Treasuries ended higher, amid the sell-off in equities. In economic news, the Labor Department said first-time jobless claims fell by 55,000 to a seasonally adjusted 438,000 for the week ended April 6, according to wire reports. While claims decreased last week, the level remained well above Wall Street's expectations and reflected a pickup over the past few weeks in applications for extended unemployment benefits.

Also, U.S. import prices rose 1.1% in March after falling 0.1% in February, the Labor Department said. Traders also were anticipating Friday's batch of economic data including a monthly report on retail sales, the Producer Price Index and the University of Michigan reading on consumer sentiment.

World Markets

European markets finished lower, as investors took some profits off the table amid weakness in U.S. equities. In London, the Financial Times-Stock Exchange 100 index fell 91.70 points, or 1.75%, to 5,137.40. In France, the CAC 40 lost 80.29 points, or 1.78%, to 4,441.54. In Germany, the DAX Index was off 102.40 points, or 1.94%, to 5,162.96.

In Asia, the markets ended mixed. The Nikkei was down 71.31 points, or 0.64%, to 11,147.27, as bank shares fell on profit-taking. In Hong Kong, the market gained 101.77 points, or 0.96%, to 10,744.91.

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