US stocks fell, led by International Business Machines Corp, after the New York Times said the largest computer maker didn't fully reveal a gain from the sale of a unit.
Nvidia Corp's disclosure that federal regulators are investigating the chipmaker's accounting boosted concern companies are misstating profits. A report showing consumer confidence unexpectedly fell this month also hurt stocks by suggesting an economic rebound may be less robust than anticipated.
"Investors are focused like a laser beam on accounting issues," said Robert Bloom, president of LF Capital, which manages US$1 billion. They are "a blow to investor confidence."
IBM, which said the unit's sale was "properly and fully" reported, accounted for one-third of the Dow Jones Industrial Average's loss. The Dow dropped 98.95, or 1 percent, to 9,903.04.
The Standard & Poor's 500 Index fell 12.30, or 1.1 percent, to 1,104.18. The NASDAQ Composite Index declined 38.17, or 2.1 percent, to 1,805.20.
For the week, the NASDAQ shed 0.8 percent, while the S&P 500 gained 0.7 percent and the Dow climbed 1.6 percent.
Exchanges will be closed tomorrow for the Presidents' Day holiday.
The University of Michigan consumer sentiment index for February fell to 90.9 from 93 last month, and analysts attributed the decline to concern that more companies have issued misleading financial reports.
"Retail sales is a driver of the economy and if consumer confidence falters then consumer spending will falter and that's not good for the economy," said Todd Clark, head of listed trading at Wells Fargo Securities in San Francisco.
The drop in confidence curbed optimism from reports this week that showed rising retail sales and falling jobless claims.
"We're looking for a correction," said Frederick Sears, who helps manage US$150 million at Investors Capital Corp in Lynnfield, Massachusetts.
"Too many people are convinced that the economy is okay and that we're out of the recession, but we don't agree."
More than 1.3 billion shares traded on the New York Stock Exchange, in line with the three-month daily average. Three stocks fell for every two that rose on the NASDAQ Stock Market, while advancing and declining shares were about even on the NYSE.
IBM fell US$5 to US$102.89. The company didn't treat the US$300 million sale of its optical transceiver unit as a one-time gain when it reported fourth-quarter earnings last month, the New York Times said. The paper said the sale was used to lower operation costs, a practice that doesn't provide an accurate picture of a company's operations.
Nvidia shares fell US$4.81 to US$57.35. The computer graphics chipmaker said the Securities and Exchange Commission is reviewing the recording of reserves in the fourth quarter of fiscal 2000 and first quarter of fiscal 2001 and product costs booked in the second and third quarters of last year. Nvidia posted the biggest advance in the S&P 500 last year.
Corporate accounting practices have come under increased scrutiny following the collapse of Enron Corp, which hid US$1 billion of losses in affiliates. Companies from Tyco International Ltd to Cisco Systems Inc have declined as investors questioned the accuracy of their earnings and revenue statements.
AES Corp tumbled US$2.50, or 26 percent, to US$7 on concern the devaluation of the Venezuelan currency will hurt income from the electricity generator's business there, analysts said.
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