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US stocks take a pounding, pressured by Enron

US stocks fell sharply on Wednesday, as the near-total implosion of Enron Corp vexed a market that was already questioning the expected revival of corporate profits and the economy, props for recent big gains.

The Dow Jones industrial average slumped 160.74 points, or 1.63 per cent, to close at 9,711.86. It was the lowest close for the Dow since November 12, and the largest Dow drop in about a month. The Nasdaq composite fell 48 points, or 2.48 per cent, to 1,887.97. The broad Standard & Poor's 500 index dropped 20.98 points, or 1.83 per cent, to 1,128.52.

Enron plunged more than 85 per cent, or $3.53, to 61 cents, after rival Dynegy Inc pulled out of its planned $9 billion takeover of the beleaguered energy trader. The stock's trading volume soared to more than 181 million shares during the regular session, setting a new record.

Last year, Enron shares were among the market's best performers, rising more than 87 per cent. So far this year, the shares have fallen more than 98 per cent.

Dynegy shares fell 12 per cent, or nearly five per cent, to $35.97.

Credit rating agencies slashed Enron's bonds to junk status and pushed the once mighty company another step closer to bankruptcy.

The Enron news dragged on the market as debate swirled around a powerful rally in stocks over the past two months. Investors, still expecting an economic recovery in 2002, are worried share prices are getting too far ahead of prospects for corporate earnings.

Enron pressured other merchant energy traders and financial heavyweights Citigroup Inc and JP Morgan Chase & Co Inc, which lent the company a total of $1 billion.

"The market felt it was getting a little too optimistic a little too quickly and there's recognition of the many, many risks in this environment," said Milton Ezrati, a senior economic strategist at Lord Abbett & Co., which oversees about $40 billion.

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