NEW YORK, June 3 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market plunged Monday as corporate news overshadowed a favorable report on the condition of the manufacturing sector of the economy in May.
The blue-chip Dow Jones industrial average dropped 215.46 points, or 2.17 percent, to 9,709.79, having added 13.56 points Friday. The tech-heavy Nasdaq composite index tanked 53.17 points, or 3.29 percent, to 1,562.56.
The broader New York Stock Exchange composite index tumbled 12.62 points to 558.16, while the Standard & Poor's 500 index fell 26.26 to 1,040.68. The American Stock Exchange composite index declined 18.70 points to 942.88 while the Wilshire 5000 Index plunged 241.40 to 9,865.09.
Big Board volume was at an estimated 1.31 billion shares, while Nasdaq volume reached 1.62 billion. Decliners overwhelmed advancers 23 to 9 on the New York Stock Exchange, while retreaters also far outnumbered gainers 26 to 9 on Nasdaq.
Analysts said stocks fell from the opening bell after Dennis Kozlowski quit Tyco International Ltd. as the chairman and left its board for "personal reasons." Tyco named former Chief Executive John F. Fort, a director, as interim chief.
Kozlowski is reportedly under criminal investigation for suspected tax evasion.
Concerns about corporate governance across the board led to a massive sell-off in shares in all sectors.
The New York Times reported Monday that New York District Attorney Robert M. Morgenthau is investigating Kozlowski's alleged use of hundreds of millions of dollars moved into family trusts to purchase goods and services without paying state sales taxes. No charges have yet been filed.
Meanwhile, on the economic front, the Institute for Supply Management, formerly known as the National Association of Purchasing Management, said the U.S. manufacturing sector grew robustly in May, amid strong increases in new orders and a continued rise in price pressures.
The group said its overall manufacturing sector index rose to 55.7 from 53.9 in April and above the 55.6 reading posted in March. Readings above 50 indicate an expansion in activity and prices in the manufacturing sector, while readings under 50 denote contraction.
The May business activity index suggested a healthy amount of growth in the overall economy, the report said. If the 55.7 May reading were to be maintained throughout the year, it would correspond with an annualized gross domestic product increase of 4.7 percent.
Norbert J. Ore, chairman of the Institute for Supply Management's Manufacturing Business Survey Committee, said: "May was a good month for manufacturing. The PMI strengthened as 16 industries saw improvement in new orders. This should help establish momentum in the sector that will carry forward into the third quarter."
Meanwhile, the Commerce Department said construction spending rose slightly in April as spending on residential construction rose to an all-time high.
The government agency said the value of new construction in the United States rose 0.2 percent in April to a seasonally adjusted annual rate of $871.9 billion after falling 1.2 percent in March.
Residential construction spending rose 0.7 percent in April to a record rate of $425.5 billion, on the heels of a 1.0 percent gain the month before.
The construction numbers follow other strong housing market data released late last month. New home sales and existing home sales both posted strong gains in April, and the National Association of Realtors said existing home sales were on track to reach record levels this year.
The housing market has provided steady support for the U.S. economy, which is still recovering from last year's recession. The U.S. economy grew at a strong 5.6 percent rate in the first quarter, but most analysts believe it will grow at a slower rate in the second quarter.
Meanwhile, the U.S. Treasury's 10-year bond rose 9/32 to 99. Its yield, which moves in the opposite direction of its price, fell to 5.00 percent from 5.04 percent late Friday.
In Europe, stock prices ended lower in Frankfurt and Paris. The German DAX index dropped 70.35 points, or 1.46 percent, to 4,747.95 and the French CAC-40 index fell 47.49 points, or 1.11 percent, to 4,227.15.
Trading activity was light as the London Stock Exchange, Europe's biggest, was closed Monday for a bank holiday and will remain closed on Tuesday, as Britons celebrate Queen Elizabeth II's 50 years on the throne.
Earlier in Asia, prices on the Tokyo Stock Exchange ended higher, snapping their four-day losing streak on weakness in the Japanese yen. Japan's blue-chip Nikkei Stock Average of 225 selective issues, which eased 6.33 points Friday, rose 137.69 points, or 1.2 percent, to 11,901.39.
Traders said the rebound was expected, as the index lost some 100 points in the last 30 minutes of Friday trading, mainly due to the Morgan Stanley Capital International's transition to a float-based methodology.
The weaker yen helped export issues, but investors were generally reluctant to build up positions ahead of Japan's January-March GDP data due out Friday, traders said.
Traders expect strong GDP figures, but their interest will be in the reaction of foreign investors, who became active buyers when the government made a much-expected upgrade in the monthly economic report last month, experts said.
The yen's decline since Friday in foreign exchange trading encouraged retail investors and institutions to buy back export issues such as technology stocks and automakers.
The yen traded around 124.30 against the U.S. dollar Monday, rebounding from the 123 level Friday, following yen-selling interventions late Friday by the Japanese monetary authorities.
Elsewhere in Asia, prices on the Hong Kong Stock Exchange ended higher, supported by gains in a few key stocks, though the tone of the market remained cautious. The blue-chip Hang Seng Index rose 57.86 points, or 0.5 percent, to 11,359.80.
Prices ended lower on the Taiwan Stock Exchange, pressured by weakness in technology issues. The Weighted Index lost 104.57 points, or 1.84 percent, to 5,571.08.
Meanwhile, prices ended slightly higher on the South Korean Stock Exchange. The Kospi Composite Index rose 8.53 points, or 1.07 percent, to 804.93.
Investors shrugged off a report that business confidence fell to a four-month low in May on concerns that export growth might slow in the face of a slower-than-expected U.S. economic recovery.
Elsewhere around the Pacific region, prices ended marginally higher in light trading on the Australian Stock Exchange amid concerns over interest rates. The blue-chip All Ordinaries Index added 3.10 points, or 0.09 percent, to 3,328.20.
Analysts said a stronger-than-expected growth in inventories and building approvals ignited concerns the Reserve Bank of Australia may hike interest rates. The board of the central bank meets Tuesday and its decision will be released Wednesday, the same day as the latest GDP report.
While the market is prepared for rising interest rates, it remains unsure of the full extent of eventual increases and that is encouraging investors to be cautious.
