Terrorism and scandals push Wall St to record lows

An upsurge of unrest in the Middle East, new terror warnings for US cities, fresh corporate scandals and a swooning dollar combined yesterday to discourage investors from buying US equities and to drag Wall Street down to record lows for the year, writes Conor O'Clery, International Business Editor, on Wall Street

Yet again the dollar tumbled against the euro, trading at 97.10 US cents compared to 96.58 on Thursday, a 26-month low. The freefall of the dollar has raised fears on Wall Street that more foreign investors will dump assets, including shares denominated in the US currency.

The dollar also fell to 120.83 yen yesterday, its lowest point since November of last year, after the Japanese finance minister discouraged speculation that he would intervene.

The Dow dropped to a new low for the year and the Standard & Poor's index of the 500 most popular stocks fell below its post-September 11th lows for the first time, falling below the 1,000 level.

It was the fifth consecutive weekly decline for the Dow, which is now almost 1,000 points below where it stood just a few weeks ago.

At one point after midday, FBI warnings of possible attacks on Jewish neighbourhoods or on Las Vegas sent the blue-chip index sliding 150 points to 9,281. Mr Rick Bensignor, chief technical strategist of Merrill Lynch, said it was unlikely that the market had found a bottom, and that it might not come for three to six months.

On the brighter side, Dell chief executive Mr Michael Dell said the computer-maker was on track to meet estimates for the second quarter, despite warnings from other computer-makers about falling demand. The chip-maker Qualcomm also said it expected earnings to be above analysts' expectations. Recent gloomy comments from Apple Computer, Advanced Micro Devices and Intel have helped drive down the Nasdaq. Intel is now trading at its lowest level since the summer of 1998.

The shadow of more corporate scandals fell over the markets after the Wall Street Journal reported serious questions about accounting practices at Merck, whose shares fell $2 to the $50 range. Also yesterday, a federal grand jury indicted four former and current executives of Rite Aid, the third-largest US drug-store chain. Those charged in the securities and accounting fraud include former chief executive Mr Martin Grass. They are accused of conspiracy to defraud, making false statements to the Securities and Exchange Commission, tampering with witnesses and obstructing various investigations.

"The charges announced today reveal a disturbing picture of dishonesty and misconduct at the highest level of a major corporation," said Mr Wayne Carlin, northeast regional director of the SEC. "Rite Aid's former senior management employed an extensive bag of tricks to manipulate the company's reported earnings and defraud its investors."

A senior White House official said yesterday President George W. Bush did not support legislation passed by the Senate Banking Committee that would place stringent new regulations on the accounting industry.

Instead, Mr Nick Calio, the Bush administration's legislative director, said the White House backed reforms unveiled by the Securities and Exchange Commission, which it sees as less draconian.