Wall Street report: Monday close

MORE murky accounting sent Wall Street on to the defensive as Friday's sharp rally became a one-day wonder. The Dow Jones Industrial Average fell 104.60 points or 1.1% to 9274.90. The Nasdaq Index, up nearly 5% on Friday, gave back 42.75 points or 3% to 1405.61.

Pharmaceuticals giant Merck was busy defending its accounting after reports that its Medco subsidiary booked as revenues $12.4bn (£8.6bn) it never collected. The money went to pharmacists as co-payments from consumers with partial prescription coverage. Merck said its accounting was proper and conformed to accounting rules, but critics said the technique inflated revenue at Medco, which has an initial public share offering in the works. Merck shares fell $1.05 or 2.2% to $48.81.

WorldCom shares slumped two cents or 8% to 23 cents as its former chief executive and chief financial officer declined to testify before a nationally televised Congressional investigation into alleged accounting fraud at that troubled telecom.

'With WorldCom front and centre, it is not surprising that the market is selling off,' said Fritz Meyer, of Invesco's growth and income fund. 'This has been a difficult time for investors, with one accounting revelation after another.'

Aluminium company Alcoa did not help when it said quarterly earnings had come in below Wall Street expectations. Its shares eased 88 cents or 2.6% to $32.50.

Techs, which had been among the biggest winners on Friday, were among the hardest hit. Semiconductor maker Intel sagged $1.04 cents or 5.3% to $18.50. IBM dropped $2.20 or 3% to $71.30.

WorldCom rivals AT&T tacked on eight cents or 0.8% to $10.27 and Sprint climbed 17 cents or 1.5% to $11.47 on signs that major clients might desert WorldCom.

Level 3, a smaller survivor in the telecoms field, jumped $1.47 or 51% to $4.36 after investors including billionaire Warren Buffett said they would subscribe to a bond offering. Qwest Communications, which faces inquiries into its accounting, recouped 28 cents or 15% to $2.10, down from $30.73 a year ago, after it announced several changes including the departure of its chief financial officer.

Online auctioneer eBay sagged $4.31 or 7% to $56.24 as it said it was buying electronic payment service PayPal for $1.5bn.