Analysts and investors on Wall Street around the world are closely monitoring the turbulent U.S. stock market, looking for signs of recovery. U.S. shares rallied in morning trading as the Justice Department announced the arrests of corporate executives involved in one of the biggest bankruptcies in U.S. history.
Stock markets in Asia closed down and Europe followed suit, although European markets picked up steam at the end of the trading day on news that U.S. shares were rallying.
Wall Street analysts said the U.S. markets moved into positive territory midmorning because of U.S. lawmakers reached an agreement on a corporate reform bill and rumors that the U.S. central bank held an emergency meeting to discuss ways to prop up the markets.
A series of corporate scandals and revelations of fraudulent accounting practices have eroded investor confidence in Wall Street, leaving analysts and politicians wondering if a recovery might be further off than anticipated.
Tuesday, the banking sector sank as the U.S. Senate held hearings to determine if two largest U.S. banks, Citigroup and J.P. Morgan Chase, helped the now-bankrupt Enron Corporation hide billions of dollars in loans. Both banks have since assured investors and employees that they did not act improperly, and their shares have edged up.
Still, some Wall Streeters say investors want to see action, not just discussions and investigations. The Justice Department took a major step in that direction Wednesday morning, announcing the arrest of three members of the Rigas family that controlled Adelphia Communications Corporation and two former corporate executives. Adelphia, a cable TV operator, declared the fifth largest bankruptcy in U.S. history last month at a cost of some $60 billion to investors.
The Adelphia officials were arrested on charges of security, wire and bank fraud. U.S. Deputy Attorney General Larry Thompson announced the arrests. "In addition to this massive securities fraud and bank fraud scheme, the complaint alleges that the defendants victimized Adelphia's shareholders through a wide variety of, quite frankly, brazen thefts," Mr. Thompson said.
Mr. Thompson said the defendants fraudulently created millions of dollars in fake management fees, entered into sham transactions with other companies, falsified the number of subscribers to its cable services and lied to lenders about Adelphia's financial performance.
Adlephia founder John Rigas and his two sons had resigned from the company following earlier disclosures of fraud.