Internet Stocks Continue to Slide, Jolting Nasdaq
Amid more signs that many small investors--and corporate insiders--are bailing out, Internet stocks tumbled again Thursday, leading a broad decline on Wall Street.
That left many Wall Streeters wondering whether the Internet stock bubble has burst--or if this decline, like others that have hit the sector over the last two years, will be only a temporary pullback followed by another surge.
The technology-laden Nasdaq composite index endured the brunt of the sell-off, sliding 70.77 points, or 2.9%, to 2,344.72. After falling for most of the day, the index mounted a late rally attempt, but it fizzled in the final half-hour.
The Dow Jones industrial average declined 71.83 points, or 0.8%, to 9,264.08, weighed down in part by fresh bad news from Brazil.
But the worst-hit stocks by far were those in the recently soaring Internet sector, where a barrage of selling sent directory firm Yahoo down $22.19, or 7.7%, to $265; online auctioneer EBay down $32, or 15%, to $181.75; and software maker Inktomi down $14, or 9.2%, to $137.50.
After more than a week of mostly falling prices, many of the individual investors whose feverish buying pumped up the group in recent months are now heading for the exits, some traders said.
“The selling is feeding on itself,” said Ciaran O’Kelly, a tech stock trader at Salomon Smith Barney in New York. “The realization is setting in that these stocks can’t keep going up five, 10 or 20 points a day.”
On Internet “bulletin boards” where small investors swap ideas and rumors about stocks, the tone has turned decidedly negative in recent days.
“I keep seeing this stock sink and sink and sink,” one woman wrote in reference to Broadcast.com, which slid 9.6% on Thursday and now is a staggering 63% below its all-time high of $289.50, reached just seven days ago. “What’s happening to it? Why should I stay when I’m losing money?”
Another investor lamented that he bought Yahoo at its very peak, writing: “I bought @ 445. I’m jumping now. . . . Seeya World!!!!”
Negative comments about the Net sector from Ralph Acampora, a well-known technical analyst at Prudential Securities, and Barton Biggs, a market strategist at Morgan Stanley Dean Witter, were behind some of the selling.
Compounding the concerns is the fact that top managers and other employees at Net companies have been increasingly aggressive sellers of their own shares in recent months, according to CDA/Investnet, a Rockville, Md., firm that tracks insider activity.
CDA views the federal filings the insiders must make in regard to transactions in their own companies’ stock. “It’s just heavy selling across the board,” said Bob Gabele, CDA president.
The ongoing drop in Net stocks has some market watchers worried that the weakness could spill into the broad market. They fear that a crumbling Internet sector could turn investors off to tech stocks at large--which have been the market’s leaders over the last year.
On Thursday, declining stocks outnumbered advancers by a 19-11 ratio on the New York Stock Exchange and by 25 to 16 on Nasdaq, in continued heavy, but not record, trading.
Weak sectors included banks, drug companies, tobacco companies and airlines. Winners included oil service stocks and utilities.
Selling in big-name tech stocks picked up Thursday. Intel slid $4.75 to $133.50, Microsoft dropped $4.31 to $158.31 and Cisco Systems lost $4.81 to $101.31. But those shares are barely off their peaks.
Also, Lucent Technologies slumped $8.56 to $106.94 after reporting that its fiscal first-quarter profit climbed a better-than-expected 26%, but sales trailed projections. The telecom equipment maker’s sales increased a disappointing 5.5%. The company attributed the shortfall to a one-time logistical glitch, but some investors were still spooked.
After the market closed, IBM said fourth-quarter earnings improved 12% and beat analysts’ average estimate by 2 cents a share. The stock rose $2.50 to $197 ahead of the report.
For the Net stocks, some experts said the current sell-off was to be expected given the hyperbolic moves some stocks had made.
“The stocks that have gone up the most have come down the most,” said Tom Taulli, analyst at Silicon Investor, a Web site specializing in technology stocks.
Excitement hit a crescendo immediately after Christmas, when many Internet-related companies reported major increases in traffic on their Web sites related to holiday shopping.
Still, even as excitement has waned--and the stocks have tumbled--traders said there didn’t appear to be wholesale dumping that would indicate a panic had set in.
Indeed, trading volumes for stocks such as Yahoo, Amazon.com and other key Net issues in recent days have been heavy but not at record levels.
On the Internet message boards, many investors counseled their brethren to look at the sell-off as a bargain-hunting opportunity.
Some people took that advice: Amazon.com closed at $106, down $7 but up from its intraday low of $92.56. Yahoo fell as low as $249.38 before bouncing back to $265.
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Balloon Burst
Most Internet-related stocks were pummeled again on Thursday, leaving some now down 50% or more from their recent peaks.
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Thurs. Drop from Stock close record high Broadcast.com $108.50 --63% Onsale 42.38 --61% Internet Amer. 29.13 --52% Amazon.com 106.00 --47% Ebay 181.75 --43% Yahoo 265.00 --40% Xoom.com 39.81 --37% Go2Net 97.75 --31% Inktomi 137.50 --28% @Home 97.38 --23% Internet index* 690.72 --11% S&P; 500 index 1,235.16 --3%
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* Interactive Week index of 50 stocks
Source: Bloomberg News, Reuters
Market Roundup, C6
Net Voices
Amid Thursday’s drop in most Internet stocks, many small investors were furiously posting questions--and opinions--on Internet bulletin boards. Here are a few comments picked from the Silicon Investor and Yahoo Finance Web sites:
“It is easy to be bullish when the stock is trending up. In my opinion there was never anything bullish except the hype. . . . One might as well invest in Beanie Babies.”
--Don W., referring to Amazon.com
“Buy, buy--half price today!”
--Robert H., referring to Amazon.com
“Amazon will continue to drop. Take it from an expert who was on the Iomega bandwagon back in ’96. . . . Amazon is just a commodity, a supermarket; anyone can sell goods. Competition will eat them alive!”
--Michael M.
“It is simple: Less buyers day by day. People are nervous to buy Yahoo or any other Internet stocks right now.”
--Anonymous
“It seems almost every bull is gone.”
--Glenn R.
