Wall Street: Wednesday close

REELING markets rebounded on what could have been a concerted effort to restore shattered investor confidence in the wake of

Traders reported that substantial orders to buy stock index futures in Chicago were funnelled through three major investment houses as markets neared their lows in mid-afternoon.

The buy order influx, which traders said could have come from big hedge funds or could have been part of an official effort directed from Washington to stabilise markets, came after President Bush called WorldCom's disclosures 'outrageous' and said US markets were 'lower than they should be.' The identity of the buyers might never be known, traders said.

The sudden reversal in stock futures helped the Dow Jones Industrial Average erase most of a 200-point drop to close down just 6.71 points at 9120.11. The Nasdaq closed up 5.44 points at 1429.43 after earlier touching 1375, its lowest since 8 October, 1998.

Trading in WorldCom shares, which peaked near $100 three years ago, was halted at Tuesday night's official close of 83 cents, but, with many analysts expecting the company to file for bankruptcy protection, they may become virtually worthless. WorldCom, which fired its chief financial officer Scott Sullivan and called in investigators after discovering the alleged fraud, had been one of the highest flying telcos.

WorldCom's disclosure follows the collapse of energy trader Enron and the arrest of the former chief executive officers of pharmaceutical company ImClone and conglomerate Tyco International.

Economists said the drumbeat of bad news was undercutting attempts to keep the US economic recovery on track. 'When your stock is going down and you're trying to meet earnings targets by cutting costs, it reinforces the trend toward low investment levels,' said John Makin, an economist at the American Enterprise Institute in Washington. 'There's no question that this is helping to delay the recovery.'

The Federal Reserve Board ended a two-day meeting with a statement that would keep official interest rates at a 40-year low of 1.75% because it still risks to the US economic recovery.

Investors had earlier dumped shares across the board, with special attention on companies which have admitted accounting irregularities or whose bookkeeping has been questioned in the past. Tyco plunged $1.61 or 12% to $11.94, ImClone closed marginally higher at $9.08, Liberty Media, the cable TV company headed by John Malone, shed 86 cents or 9.3% to $8.44 and media conglomerate News Corp was off $1.68 or 7% to $22.52. Martha Stewart Living Omnimedia, which has been drawn into the ImClone scandal, slumped $3.19 or 23% to $10.41.

Lenders to WorldCom were taken down as well. Bank of America dipped $2.53 or 3.6% to $67.50, Citigroup eased $2.21 or 5.7% to $36.91 and JP Morgan fell $1.38 or 4.2% to $31.55.

Earnings warnings hit internet retailer Priceline.com, off 97 cents or 26% at $2.83, and semiconductor manufacturer Micron Technology, down $1.43 or 7% at $18.32.