Wall St. rally may stall

February 26, 2002 Posted: 1406 GMT

NEW YORK (CNN/Money) -- U.S. investors may find any attempts to prolong a stock rally Tuesday checked by the latest reminder of the seriousness of accounting concerns -- key participants in the Enron debacle are due to appear before a congressional committee later in the day.

Early indications point to a modestly higher open for the tech-laden Nasdaq market, but a flat start for the broader U.S. market.

Scandal fans may be intrigued, but those who are anxious about corporate bookkeeping practices can't help but dread Tuesday's scheduled hearing about Enron before a Senate Commerce subcommittee. The star attractions will be Jeffrey Skilling, the former CEO of the now bankrupt energy trader who has said he was unaware of the accounting shenanigans that led to Enron's fall, and company vice president Sherron Watkins, who has pointed to Skilling as a culprit in the matter.

What may hurt Skilling's argument is a transcript, released by a House committee, of a videotape in which he defends the Enron accounting practices.

What may hurt the stock markets is the reminder of the Enron mess. Questions about the kind of accounting that caused the collapse of Enron's stock have dogged Wall Street since the bankruptcy filing in December. The lack of confidence is seen as a key reason why the Nasdaq composite index is down for the year, and the Dow Jones industrial average only reached positive territory Monday.

The only economic data due Tuesday is the Conference Board's measure of consumer confidence for February. Economists surveyed by Briefing.com expects the index to slip slightly to 97 from 97.3 in January.

Economic indicators are showing that looking ahead, things are going to get a lot better, Hugh Johnson, chief investment officer at First Albany, told CNNfn's CNN Money Morning. "Investors have a good reason to say this looks like the start of a recovery ... but Enron is still this dark cloud hanging over the market," he said.

However, one stock that may boost the Dow Tuesday is retailer Home Depot (HD: Research, Estimates). The No. 1 home retailer said it earned 30 cents per share in the fiscal fourth quarter, 2 cents better than expected and an improvement on the 20 cents per share earned one year earlier. Home Depot shares rose 38 cents to $52.45 in before-hours trading Tuesday.

The Dow Jones industrial average begins at 10,145.71, having risen more than 177 points in Monday's session. That marks the fifth straight trading day that the Dow has moved either up or down by 100 or more points, a signal of continued volatility among the normally more staid blue chips.

The Nasdaq composite index is at 1,769.88 following a 45-point run-up, while the Standard & Poor's 500 starts at 1,109.43 after adding 19.59.

While most Asian stock markets finished higher Tuesday, Tokyo's Nikkei index ended with a decline because of doubts about a forthcoming government economic package. European bourses were higher at midday.

Treasury prices slipped a little in early trading, with the 10-year note yield holding at 4.85 percent. The dollar was little changed against both the yen and euro. Brent oil futures rose 10 cents to $20.08 a barrel in London. Gold rose in early London trading.

Among the issues that could boost the Nasdaq early on is Sun Microsystems (SUNW: Research, Estimates). It rose 29 cents to $9.16 in before-hours trading Tuesday after a British reseller of its Unix server products reported renewed customer interest.

Wireless technology developer Qualcomm (QCOM: Research, Estimates) continued to advance on its Monday announcement of improved chip demand and its reiteration of its fiscal second-quarter earnings outlook. W.A. Hambrecht, with a "buy" rating, raised its fiscal 2002 and 2003 forecasts for the company. Qualcomm rose 69 cents to $36.60 in before-hours trading Tuesday.

On the negative side, four major U.S. brokerages had their earnings estimates lowered by ABN Amro. The four are Goldman Sachs (GS: Research, Estimates) , Merrill Lynch (MER: Research, Estimates) , Morgan Stanley Dean Witter (MWD: Research, Estimates)  and Lehman Brothers (LEH: Research, Estimates).

Department store operator Federated Department Stores (FD: Research, Estimates) reported fiscal fourth-quarter earnings of $1.90 a share, three cents better than expected. However, the company warned that first quarter earnings would be between 25 cents and 30 cents per share, versus analysts' current estimates of 34 cents. Federated shares fell 31 cents to $38.70 in before-hours trading Tuesday.

After the closing bell, beleaguered apparel retailer Gap (GPS: Research, Estimates)  is expected to post a quarterly loss.