NEW YORK, Aug. 23 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market dropped in light trading Friday, knocked down by concerns over corporate governance issues involving Citigroup and AOL Time Warner. It did, however, increase in value compared to last week.
The blue-chip Dow Jones industrial average lost 180.68 points, or 2.00 percent, to 8,872.96, having jumped 96.41 points Thursday. The tech-heavy Nasdaq composite index dropped 42.48 points, or 2.98 percent, after rising 13.70 points in the previous session.
The broader New York Stock Exchange composite index fell 10.30 points to 505.36, while the Standard & Poor's 500 index lost 21.83 points to 940.87. The American Stock Exchange composite index declined 9.94 points to 857.43, while the Wilshire 5000 Index lost 198.62 points to 8,876.95.
Big Board volume declined to an estimated 984.02 million shares, while Nasdaq volume was around 1.37 billion.
With no fresh release of macroeconomic data, investors focused on corporate governance issues involving Citigroup and AOL Time Warner.
Worries about corporate governance had faded somewhat since the scandals surrounding energy trader Enron Corp. and WorldCom Inc. sent stocks into a tailspin, but the issue has not completely evaporated.
Jeremy Simon, analyst at Thomson Financial Corp., said, "Shares are encountering selling pressure as investors look to lock in gains from the previous session.
"Among the stories driving the action is news that AOL may have to write down the value of a massive chunk of assets, alongside a separate story of an SEC investigation into actions by top company executives. Also, Citigroup is slumping on worries over a probe into company Chairman Sanford Weill and practices at Solomon Smith Barney," Simon said.
The Wall Street Journal reported New York State's attorney general has widened his probe of Citigroup Inc.'s brokerage unit and is looking into a lucrative financing deal and what role Citigroup Chief Executive Sanford Weill might have played.
Citing unnamed sources familiar with the matter, the Journal said New York Attorney General Eliot Spitzer is investigating whether Weill might have pressured Jack Grubman, then a telecommunications analyst at Citigroup's Salomon Smith Barney unit, into raising his rating on AT&T Corp. in order to win a spot in underwriting a large stock offering for AT&T's wireless business.
Salomon was one of three Wall Street firms tapped by AT&T in April 2000 to underwrite the $10.62 billion offering of a tracking stock for AT&T's wireless phone unit.
Salomon, Merrill Lynch & Co. and Goldman Sachs Group Inc. each took home $45 million in fees for the deal, the Journal said.
Salomon landed a position on the underwriting team after Grubman, whose bullish opinions and close relationships with a number of other telecoms firms that have since collapsed is the focus of several investigations, upgraded his rating on AT&T to buy, the Journal said. Grubman resigned from Salomon last week.
The change by Grubman, who until then had held long-standing bearish opinions of the nation's top long-distance telephone company, came after Weill, an AT&T board member, nudged the analyst to give AT&T a fresh hearing, the Journal quoted unnamed people familiar with the deal as saying.
AT&T Chairman C. Michael Armstrong regularly had asked Weill to urge Grubman to revisit the merits of AT&T's cable strategy, a person familiar with the matter told the paper. Armstrong also was a Citigroup board member at the time.
AOL also dominated the agenda on reports that some top executives are under SEC investigation for upbeat forecasts made while they were selling shares of the media company.
In addition, there are other reports that the online unit's dealings with WorldCom is the biggest chunk of the $49 million in questionable ad revenue being investigated by U.S. authorities.
Elsewhere on the corporate front, Bear Stearns cut its third quarter and fiscal year 2002 and 2003 earnings per share estimates on Intel Corp.
Banc of America Securities cut its 2003 estimates for a number of chip-equipment makers, including Applied Materials, citing concerns that global capital spending will stall for the next 12 months. The firm also said it think Intel will cut its 2003 capital expenditure.
Dow component Philip Morris fell following a negative note on the tobacco sector from brokers at Goldman Sachs.
The firm said cigarette stocks have limited upside potential for the next few months following an analysis of U.S. retail sales data for July. Within the sector, the firm said that Philip Morris' share performance was particularly weak in July.
Hewlett-Packard slipped after brokers at J.P. Morgan said that near-term challenges for the computer hardware maker could weigh on results. The firm also said that tough industry conditions could pose a risk to the company's July estimates and that the company could issue disappointing guidance about its October quarter.
Looking ahead, analysts said eyes will begin to focus on a relatively heavy economic calendar next week, which includes new and existing home sales, consumer confidence reports from the Conference Board and the University of Michigan, durable goods orders, and revisions to second-quarter GDP among others.
Meanwhile, U.S. Treasury prices pushed higher. The 10-year bond rose 21/32 to 101 4/32. Its yield, which moves in the opposite direction of its price, slipped to 4.23 percent from 4.32 percent late Thursday.
In Europe, stock prices ended lower in light pre-weekend trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index lost 44.90 points, or 1.01 percent, to 4,389.80. The London stock market will be closed on Monday, Aug. 26, for a public holiday. Trading will resume on Tuesday.
Meanwhile, the German DAX index fell 78.29 points, or 2.00 percent, to 3,828.26 and the French CAC-40 index fell 66.51 points, or 1.85 percent, to 3,526.09.
Analysts said European stocks lost ground amid a lack of corporate news and the weak performance on Wall Street.
Caught between a tendency to take profits ahead of the weekend and a positively oriented market, traders said investor sentiment is likely to remain mixed.
Telecom-equipment makers, mobile-phone stocks, insurance issues and banks all were under pressure as traders tried to avoid long positions before the weekend.
London stocks also were pressured by a report showing the United Kingdom's second quarter GDP figures were revised down to 0.6 percent on the quarter and 1.2 percent on the year. The main reason for the revision was a sharp drop in industrial output over the Jubilee holiday.
Earlier in Asia, prices on the Tokyo Stock Exchange ended higher, supported by Wall Street's continued rebound and further strength in the U.S. dollar against the Japanese yen. But, the momentum was not strong enough to lift the Nikkei Stock Average past resistance around the 10,000-point level. Japan's blue-chip Nikkei Stock Average of 225 selective issues, which jumped 171.41 points Thursday, added another 53.43 points, or 0.54 percent, to 9,867.45. The key index had been up as high as 9,979.88 earlier in the session.
Even with a number of supportive factors, analysts said, poor supply and demand conditions are making the market top-heavy.
Investors are cautious about boosting exposure to blue chip stocks which could be vulnerable to selling by local financial institutions looking to unwind more of their cross-held shares by the Sept. 30 end of the fiscal first half.
Experts said such corporate selling will remain one of the biggest concerns over the coming month.
Life insurers are expected to remain sellers of future contracts until early September to hedge their moves to set up exchange traded funds using their vast shareholdings.
Meanwhile, analysts said the market managed to retain some of its morning gains as Thursday's rise on Wall Street and strength in the U.S. dollar lifted exporters, including technology issues.
The dollar rebounded above the 120.00-yen level on global currency markets, a gain which will boost the value of Japanese exporters' overseas earnings when translated into yen terms.
Elsewhere in Asia, prices ended sharply lower on the Hong Kong Stock Exchange as worries about a sustained recovery in the corporate sector outweighed recent robust earnings by key blue-chips. The blue-chip Hang Seng Index sank 178.31 points, or 1.71 percent, to 10,245.69.
Prices on the South Korean Stock Exchange ended slightly lower. The key Kospi Composite Index, which rose 9.05 points Thursday, slipped 5.24 points, or 0.7 percent, to 740.51.
Prices ended slightly higher on the Taiwan Stock Exchange, supported by continued strength in high-tech issues. The tech heavy Weighted Index, which rose 68.70 points Thursday, added 12.36 points, or 0.30 percent, to 4,968.85.
Elsewhere around the Pacific region, prices ended slightly lower on the Australian Stock Exchange, pressured by some bouts of profit-taking. The blue-chip All Ordinaries Index, which rose 29.20 points Thursday, gave back 9.60 points, or 0.30 percent, to 3,133.40.
