Wall Street report: Monday close

INVESTOR worries that Wall Street's equivalent of Watergate might reach into the White House drove markets to fresh five-year lows. But US markets bounced off the worst levels since September on what traders said was massive buying of market index futures ahead of testimony before Congress today (Tuesday) by Federal Reserve chairman Alan Greenspan.

The Dow Jones Industrial Average plunged just shy of 440 points before coming back in a rush in the final hour to finish the day down 45.34 points or 0.52% to 8639.19. The Nasdaq Index snapped back as well to close up 8.70 points or 0.63% to 1382.20.

The early sell-off was driven in part by weekend revelations regarding the investing activities of President George W. Bush and Vice President Dick Cheney before their election to the White House.

Calls for the resignation of Securities and Exchange Commission chairman Harvey Pitt added to a climate of distrust in American business leadership, analysts said.

'Psychology is so negative,' said Donald Selkin, director of equity research at investment firm Joseph Stevens. 'And then you got the crisis of confidence over leadership. You have the Vice President being sued by Halliburton shareholders and people clamoring for SEC chief Pitts resignation.'

A speech billed as a major statement on the economy by President Bush designed to boost investor confidence failed to stem the selling. Shares in Halliburton, the company formerly headed by Vice President Cheney, tumbled another 42 cents or 3% to $13.50.

The company and Cheney were sued by shareholders last week for over an accounting change meant to boost earnings. Halliburton's current chief executive said at the weekend that Cheney was aware of the change, which occurred while Cheney headed Halliburton.

The SEC is investigating Halliburton's bookkeeping. Bush has been parrying allegations that he had insider information when he sold shares in an energy company a decade ago while he was serving as a director.

But sellers turned into buyers in the final hour on what traders said was massive buying of index futures in Chicago. The sudden avalanche of buying had the hallmarks of an official intervention, possibly by the top-level market stabilisation committee whose members include Greenspan and Treasury Secretary Paul O'Neill. But some analysts speculated that the rally was prompted by short-sellers covering their positions ahead of Greenspan's testimony on fears that his comments would engineer a market re-bound.

Whatever the reason, the rally capped a remarkable day in which investors again dumped shares in companies caught up in accounting scandals. WorldCom, the troubled telecoms company which has admitted it cooked its books, dropped two cents or 15% to 11.5 cents on a report that it would miss a bond payment this week and could be forced to file for bankruptcy.

Duke, down $1.05 or 4% to $23.70, and El Paso, off four cents or 1% to $4.15, fell on signs that they had been caught up in the investigation into sham energy trading contracts.

A slide in the US dollar as foreign investors bailed out of American paper assets helped send financial shares sliding before they too trimmed their losses. Citigroup, down 2% early, came back to close up 59 cents or 1.6% to $36.94.

A major merger in the pharmaceutical sector erased some of the negativity in that beaten down sector, even while Pfizer stumbled $3.33 or 10% to $28.87 as investors worried that it had paid too much in the current uncertain environment in offering $60bn for rival Pharmacia.