Stocks Fall As WorldCom Reopens For Trading

WorldCom plunged 92% on a record 1.5 billion shares on Monday, accounting for half of the Nasdaq’s 3-billion share day.

The ISDEX fell 7 to 99, and the Nasdaq dropped 59 to 1403, the index’s lowest close in 5 years. The S&P 500 fell 21 to 968, just 3 points above its September closing low, and the Dow lost 133 to 9109. The Dow’s losses would have been much worse if not for a 3.6% gain in 3M, the index’s most heavily-weighted stock. Volume declined to 1.42 billion shares on the NYSE, but soared to 2.97 billion on the Nasdaq. Decliners led 20 to 11 on the NYSE, and 23 to 11 on the Nasdaq.

After the close, Advent Software plunged on a warning, and Rational Software fell after lowering revenue estimates.

During the day, WorldCom plunged 92.8% to 6 cents a share after being halted since last week on revelations of massive accounting fraud. At 6 cents a share, investors are essentially pricing in bankruptcy for the telecom giant, a process in which shareholders usually receive nothing.

Outsourcing giants IBM , EDS , and Computer Sciences fell sharply on accounting concerns raised by the Wall Street Journal.

Netegrity plunged 61% on a warning.

Storage stocks were weak after Lazard Freres issued a Sell rating on Brocade .

Compuware lost 26% on negative comments from Morgan Stanley. fell 7% on a new 0.78-share tender offer from parent Network Associates .

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

We’re going to look at the intraday charts today, because the indexes have all had some breakdowns in the last couple of days. Those bear flags/pennants on the Dow (first chart) and S&P (second chart) give measured targets to about 8835-8877 on the Dow and 937-949 on the S&P 500 (the September intraday low was 944.75). The Nasdaq (third chart) also looks like a bear flag breakdown, but a measured target is harder to arrive at. First supports are 9100, 9000 and 8926 on the Dow; 965 and 952 on the S&P; and 1387-1395 and 1375 on the Nasdaq. Weakness could continue for the next couple of days because of the fear of a terrorist attack on July 4th. Resistance is 1420-1425 on the Nasdaq, 975-980 on the S&P, and 9200-9220 on the Dow. A retest of the recent lows with a higher VIX (see fourth chart below) would be bullish, but that would take a nearly 20% jump in the options volatility index.



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