Wall Street: Wednesday close

A LAWSUIT filed against US Vice-President Dick Cheney and the company he headed for five years, and a criminal investigation into telco

The Dow Jones Industrial Average, which fell 178 points after President Bush's speech against corporate fraud on Tuesday, dropped another 282.59 points or 3.1% to 8813.50, its lowest close since late September. The Nasdaq lost 35.10 points or 2.5% to 1346.02, near a five-year low.

A civil lawsuit filed on behalf of two shareholders against energy services firm Halliburton and Cheney, its former chief exectuive, alleged they defrauded investors by overstating earnings.

Halliburton disclosed an investigation by the SEC into its book-keeping earlier this year when questions first arose about an accounting change that occurred under Cheney's leadership. Halliburton shares dropped 57 cents or 4% to $13.55, down from $36.79 in the past year.

The White House, which has been parrying questions about Bush's share trading while he was an insider at another energy company a decade ago, said the lawsuit against Cheney was 'without merit'.

Qwest fell another 83 cents or 32% to $1.73 as it confirmed that the US Attorney's office in Denver had launched an investigation into its accounting. Shares in Qwest, which is also the target of an SEC investigation, traded above $50 within the past two years.

Other companies caught up in the accounting imbroglio were mixed. Merck, the pharmaceuticals company, dipped another $2.18 or 5% to $43.57. Conglomerate Tyco International was flat at $13.03.

Bush's speech on corporate governance was criticised for lacking specifics and muscle in his threats to crack down on executives caught defrauding investors. Barry Hyman, chief investment strategist at Wall Street firm Ehrenkrantz King Nussbaum, said 'investors are waiting for the next big story to hit and are fearing the consequences'.

'Bush needed to be more emphatic,' Hyman said. 'His speech wasn't detailed enough. You really need to attack this problem to regain investor confidence.'

The sell-off was broad with weakness in industrial giants suggesting investors fear the crisis of confidence on Wall Street could help tip the economy back into recession. General Motors retreated $3.53 or 7% to $47.61 and Ford came off $1.14 or 8% to $13.97.

Standard & Poor's decision to drop seven foreign companies including Royal Dutch and Unilever from the S&P 500 and replace them with US companies caused price swings. Royal Dutch's US shares slumped $5.19 or 9% to $50.75. Unilever's American shares slid $1.36 or 4% to $35.10.

Companies entering the S&P 500 rose as investment fund managers sought to re-balance their portfolios to reflect weighting in the benchmark index. Package delivery company UPS jumped $2.51 or 4% to $63.25, eBay leapt $1.78 or 3% to $59.83 and investment bank Goldman Sachs tacked on 64 cents or 1% to $71.55.

Cisco Systems surged 37 cents or 3% to $13.51 after Merrill Lynch, which had recommended the shares at $65, said now was a good time to buy the network switch maker. Media conglomerate Viacom, with holdings which include MTV, dived $4.71 or 12% to $36.10 in an absence of news.