Wall St report: Tuesday close

PRESIDENT George Bush's nationally televised speech aimed at stemming company fraud and restoring confidence to battered US markets was greeted with more selling.

The Dow Jones Industrial Average, up 50 points early in the day, fell after the speech to close down 178.81 points or 1.9% to 9096.09. The Nasdaq dropped 24.47 points or 1.7% to 1381.14.

The White House's attempt to bolster investor confidence included a proposal to double the jail terms of executives caught defrauding investors in order to stamp out the 'abuses and excesses' which Bush said grew out of the Nineties market boom.

The widely-touted speech came after the first 17 months of the Bush Presidency produced the biggest market drop since 1969 when the Vietnam War and recession sent markets sliding under President Richard Nixon.

Bush himself has been plagued by disclosures that, as a director of an energy company in the late Eighties and early Nineties, he sold shares just before negative news sent them tumbling, and that he faced a Securities and Exchange Commission investigation into his conduct in not disclosing information to shareholders.

Vice president Richard Cheney has also faced questions over accounting changes made while he was head of energy services company Halliburton. And Harvey Pitt, a former counsel to accounting firms who Bush appointed to head the Securities and Exchange Commission, has defied calls for his resignation for not acting to head off the crisis of confidence.

Analysts said that it might be difficult for Bush to serve as the leader to restore integrity to corporate America, given his background. 'Even if you excuse him from the cause, he still has to be responsible to reverse it,' said Alan Kral, investment manager at the New York firm oif Trevor Stewart Burton & Jacobsen. 'To the extent that he doesn't do anything, he is going to be responsible.'

Attention remained focused on company accounting with pharmaceuticals company Merck falling another $2.06 or 4.3% to $45.75 on media reports out on Monday that it booked $12.4bn (£8.6bn) in revenues it did not collect.

WorldCom, the target of a high-profile Congressional investigation into its alleged accounting fraud, retreated two cents or 9% to 21 cents.

Fears that the current earnings season could uncover more accounting surprises fuelled the negative sentiment, analysts said. Analysts' downgrades did not help, with semiconductor equipment makers falling on a negative call from Merrill Lynch.

Applied Materials lost $1.28 or 6.7% to $17.72 and Novellus slid $2.30 or 7.4% to $28.35. Intel eased 54 cents or 3% to $17.96 after Salomon Smith Barney cut its forecast for the semiconductor maker.

Pharmaceuticals firm Wyeth tumbled $11.94 or 24% to $37.30 after a study showed potentially more damaging side effects from its hormone replacement therapy.

Top-line jeweller Tiffany's fell $3.09 or 9.2% to $30.49 after it said sales would come in at the low end of expectations in the current and approaching quarters.

PepsiCo fell $3.59 or 7.5% to $45.26 as its outlook disappointed investors. Rival Coca-Cola was marked down 94 cents or 1.6% to $56.34.