E-Tailers Slump, but Nasdaq Still Gains
The technology and Internet stock sectors continued their wild ride on Monday, with online retailing issues sinking further while investors poured back into leading telecom names.
The Nasdaq composite set another record high, inching up modestly, while the Dow Jones industrials failed to sustain an early rally and fell back from record-high territory.
Qualcomm, a major maker of wireless-phone technology, soared again, by $46.94 to $513.44 a share, nearing its recent peak of $522.13.
Shares of the San Diego-based company now are up more than eighteenfold for the year. Investors view its technology as benefiting from huge expected growth in wireless communications, but the latest wave of buying stems in part from a 4-for-1 stock split expected to take effect Thursday, traders say.
Likewise, JDS Uniphase, another telecom equipment player, gained $37.19 to $335.25 ahead of its 2-for-1 split Wednesday.
Stock splits don’t alter a company’s financial picture or stock valuation, they just lower its share price. But investors have lately viewed any split announcement as wildly bullish.
Another example: Commerce One, a provider of Web-related commerce between businesses, soared $57.06 a share, to $256.44 Monday, after the company’s 3-for-1 stock split took effect. The stock has now skyrocketed more than thirty-sixfold since going public in July, giving it a market value of $18.5 billion.
Another provider of Web-based business solutions, Retek Inc., surged $30.13, to $85 a share, after Credit Suisse First Boston initiated coverage with a “strong buy” rating. Retek makes software that enables online, business-to-business inventory management.
Some old Internet favorites also kept rallying. After losing as much as $20 early in the session, Yahoo rose to end with a gain of $12.38 for the day, to $415.
That rally in the leading Internet portal helped the red-hot Nasdaq composite index edge up 5.94 points to a record 3,975.38, its seventh straight closing record on the path toward 4,000. The Dow Jones average of 30 industrials fell 14.68 points to 11,391.08. Trading volume slowed across the board.
On the downside, Internet retailing shares slumped further. Despite indications that the “e-tail” firms’ holiday sales will rise exponentially from a year ago, there’s concern about their growth slowing after the holidays. Investors also are worried about the sites’ ability to maintain customers after widespread reports of poor customer service leading up to Christmas.
EToys tumbled another $5, to $25.94, as it continued to sink toward the $20-a-share price at which the company went public last May 20. The stock peaked at $86 in October.
Shares of the Santa Monica-based e-tailer were cut to long-term “attractive” from “buy” by analyst Lauren Cooks Levitan at Robertson Stephens & Co.
Leading online retailer Amazon.com skidded $8.88 to $81.13, amid concerns about lower-than-expected gross profit margins for the current quarter. Since early November, Amazon shares had gained more than 84% to a recent peak of $113 on Dec. 9. Since then, several analysts have lowered their ratings on the stock amid concerns about costs and profit margins.
Another Internet retailer, FreeShop.com, plummeted $8.25, to $36.
“People are realizing that technology stocks and retailing stocks are not the same things,” said David Cooperstein, director of consumer e-commerce research for Forrester Research Inc. in Boston.
“Most of these companies should benefit from the holidays, but what happens after that?” said Paul Meeks, portfolio manager of Merrill Lynch’s Global Technology Fund. “What’s the next catalyst for a lot of these stocks?”
The Goldman Sachs Internet Index fell for the third straight session, shedding 2.2% Monday.
In the telecom sector, money coming out of some U.S. phone firms may have been finding a home in U.S.-traded shares of several foreign telecommunications issues. Korea Telecom jumped $6.13 to $74.63, Nortel Networks surged $9.94 to $108.63, and Russian wireless-phone provider Vimpel Communications climbed $6.56 to $33.25.
Bond prices and yields, meanwhile, were little changed, with the yield on the 30-year Treasury bond edging down to 6.46%.
The Standard & Poor’s 500 index slipped 1.24 points to 1,457.10, and the Russell 2,000 index of smaller companies rose 2.03 points to 484.46.
In Mexico the main market index jumped 0.9% to a record 6,986.38.
Bloomberg News was used in compiling this report.
Market Roundup: C10
