Stocks Close Lower

The market was weighed down by news of accounting probes, lowered profit forecasts, analyst downgrades of stocks, and debt rating reductions

Stocks slumped on Wednesday after another batch of negative corporate news left Wall Street more anxious about company profits.

The Dow Jones industrial average lost 54.80 points, or 0.55%, to 9,926.78. The Standard & Poor's 500 Index, meanwhile, was off 6.83 points, or 0.64% to 1067.72. The Nasdaq Composite Index lost 27.77 points, or 1.68%, to 1,624.40.

The market will likely be searching for direction again on Thursday as tomorrow's economic data calendar is fairly light. Initial unemployment benefit claims for the week ended May 25 are due out. Standard & Poor's economic research unit MMS expecting the number of workers filing for the first time to decline to 410,000 from 416,000 in the previous week.

Among the few companies reporting quarterly earnings tomorrow are warehouse retailer Costco (COST ) and apparel merchant Chico's FAS (CHS ).

In corporate news on Wednesday, oilfield services company Halliburton (HAL ) said the Securities and Exchange Commission has begun to probe its accounting practices.

Also in the energy sector, El Paso (EP ), the biggest U.S. natural-gas pipeline owner, said it lowered its 2002 profit estimates, reduced its energy-trading jobs by half and plans to sell $1.5 billion in stock. In technology, seemingly good news from chip gear maker Novellus Systems (NVLS ) that it was raising forward estimates was more than offset by investor displeasure over the company's refusal to give guidance for their upcoming quarter, says Standard & Poor's economic research unit MMS.

JDS Uniphase (JDSU ), a fiber-optic equipment parts maker, saw its investment rating cut by Credit Suisse First Boston to "buy" from "strong buy" because of weak demand.

In the same industry, optical equipment company Nortel Networks (NT ) announced it plans to restructure its optical long-haul business, which will cost some 3,500 related jobs, or about $600 million in charges, the majority of which will be recorded in the second and third quarters.

Shares of giant retailer Toys "R" Us (TOY ) moved lower after the company's senior debt rating was downgraded by Standard & Poor's to BBB, its second lowest investment grade, from its previous BBB+ rating.

Debt downgrades hurt other stocks as well. AT&T's (T ) credit rating was cut to Baa2, two notches above junk status, by Moody's Investors Service. Meanwhile, Standard & Poor's downgraded the senior unsecured debt of Williams Cos. (WMB ) to BBB- and its corporate credit rating to BBB.

On an upbeat note, Starbucks (SBUX ) was upgraded by Merrill Lynch a near-term "strong buy" from "buy" with the analyst citing new customers, increased customer visits among other factors.

Wall Street will continue to keep a wary eye on the global situation. In the Middle East, tensions remain high after recent attacks on civilians in Israel after the country's military struck at Palestinian strongholds in attempts to stop the attacks. Meanwhile, Pakistani and Indian troops are amassing on the border between the two countries as the nations remain in a stalemate over what to do with the disputed state of Kashmir.

Treasury Market

Treasuries ended higher on Wednesday. The market was lifted by much better than expected results for this afternoon's auction of two-year notes. Short covering helped extend the gains, and the entire yield curve has moved higher, according to S&P MMS. World Markets

Europe's markets closed mixed. London's FTSE 100 index was up 8.80 points, or 0.17%, to 5083 as the British Retail Consortium said retail confidence rose in March.

In Paris, the CAC-40 was down 4.72 points, or 0.11%, to 4,334.85 as French manufacturers' confidence rose in May.

Germany's DAX index was off 36.78 points, or 0.75% to 4,881.80 as German machine orders slump. However, published reports say German unemployment fell below 4 million in May.

Asian markets closed lower.

The Nikkei index in Japan was down 83.03 points, or 0.70%, to 11,853.00 from poor sentiment following the poor finish on Wall Street Tuesday due to the lower-than-estimated May Consumer Confidence data. Exporter shares sent the market lower, and domestic-related shares were hurt by a less-than-expected increase in Japan's Industrial Production for April, which rose 0.2% month over month.

The Hang Seng index in Hong Kong was off 150.92 points, or 1.30%, to 11,430.66.

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