Broad Market Slips; Some Net Stocks Fall Sharply

Internet-related stocks on Tuesday gave back some of their recent spectacular gains, while the broad market closed modestly lower.

Meanwhile, the dollar tumbled on new speculation that Japan will unveil tax cuts to reinvigorate its economy.

On Wall Street, most major indexes ended the day off slightly after a morning rally. The Dow Jones industrials eased 6.73 points to 9,085.04 after trading as high as 9,150 early on.

The Nasdaq composite index lost 1.36 points to 1,908.11.

Winners had a narrow edge over losers on the New York Stock Exchange. But smaller stocks overall were weaker, with losers topping winners by 23 to 19 on Nasdaq.

In the Internet sector, the losses were heavy indeed, one day after the group roared to new highs.

Internet access provider EarthLink Network sank $9.03 to $71.22. Bookseller Amazon.com tumbled $17.38 to $122.13 and search vehicle Excite slid $10.75 to $96.25.

But those losses followed huge gains on Monday--when Excite, for example, jumped $8.06.

Monday’s movement in the stocks “was phenomenal, but they don’t go in a straight line,” said Jeffrey Eglow, chief investment officer of Highlander Capital Management, which oversees $300 million. “If you’re not thinking about taking profits in these stocks, you’re not doing your job.”

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For the market as a whole, quarterly earnings reports remain a concern. Those reports are beginning to trickle out.

There was a burst of enthusiasm earlier Tuesday after aluminum giant Alcoa, always one of the first major companies to report quarterly results, posted a stronger-than-expected profit of $1.24 a share, up from $1.19 a year ago.

Alcoa, one of the 30 Dow index stocks, rose as high as $68.75. But it then retreated, closing at $65.69, up 69 cents.

Analysts said the market was pausing to consolidate recent strong gains. “We have had a good rally in the market over the last couple of weeks, so you just need a day to pause,” said Tony Dwyer, chief market strategist at Ladenberg Thalmann.

In other trading, the bond market was weak. The yield on the 30-year Treasury bond inched up to 5.60% after falling Monday to 5.57%, the lowest yield in more than 20 years.

Bonds were hurt by a falling dollar, which dropped to 138.75 yen in New York, down from 140.15 on Monday, on expectations for a significant Japanese tax cut.

Those same expectations helped push Tokyo stocks up a modest 0.4% and lifted the South Korean market 2.6%. But other Asian markets were mixed.

Among Tuesday’s highlights:

* Internet-related stocks falling included America Online, down $4.38 to $108.88; Lycos, down $14.56 to $85; Yahoo, down $8.25 to $191; Zapata, down $4 to $17.50 (after soaring 118% on Monday); and Audio Book Club, down $4.63 to $14.75.

But Internet software firm Inktomi rose for a fourth day, up $2.88 to $76.50. And software retailer Egghead.com added 69 cents to $15.50 after leaping 65% on Monday.

* Many financial stocks were strong, with Merrill Lynch up $3.31 to a record $104.31, Citicorp up $2.56 to $160.50 and J.P. Morgan up $4.13 to $122.69.

* Oil stocks suffered as crude prices fell again. Chevron lost $2.13 to $82.50 and Atlantic Richfield sank $2.19 to $77.38.

* Venator Group and Sports Authority both plunged after the two said markdowns will mean second-quarter earnings below expectations--threatening their planned merger as the two biggest U.S. sellers of athletic shoes.

Venator, which owns Foot Locker, sank $2.75 to $18.15; Sports Authority lost $2.06 to $14.50. The declines could make the rival bid for Sports Authority from investor Leonard Green’s Gart Sports more likely to succeed.

Market Roundup, D9