Rebound in Internet Stocks Stokes Broad Nasdaq Rally
Internet stocks rebounded sharply Wednesday, leading a broad rally in the Nasdaq market, as a better-than-expected earnings report from Yahoo revived investors’ appetite for “dot-com” shares.
The gains in Net shares helped send the Nasdaq composite index up 143.17 points, or 3.6%, to 4,099.59, putting the index back in the black for the year after its stunning losses in March and April.
The broader market also rallied Wednesday, though gains outside of the tech and brokerage sectors were more muted. The Dow industrials rose 56.57 points, or 0.5%, to 10,783.76.
On Nasdaq, volume was active at nearly 1.8 billion shares, and rising stocks outnumbered losers by 24 to 14.
Quarterly earnings reported by leading Internet portal Yahoo late Tuesday set the stage for the tech rally. With many Net shares down dramatically in recent weeks, amid mounting investor concerns about the long-term prospects of many Net companies, Yahoo’s better-than-expected profit of $65 million helped revive enthusiasm.
“You have a nice earnings report from Yahoo giving people confidence in the earnings of other Internet companies,” said Howard Kornblue, manager of the $450-million Magna Cap-Fund.
Yahoo zoomed $19.44 to $124.94, though it still remains far below its record high of $250.06 set earlier this year.
Other Net gainers included Inktomi, up $10.94 to $127.56; America Online, up $1 to $57; and Priceline.com, up $3.13 to $35.63.
Still, traders cautioned that many Net stocks were so badly beaten down that they were primed for at least a short-term rally. Whether it can continue isn’t clear, they said.
Indeed, some of the buying Wednesday wasn’t by investors looking to pick up bargains, but by “short sellers” who had previously sold borrowed Net shares, betting on a continuing decline. As the stocks jumped, some of those short sellers opted to buy back the shares and close out their positions.
Analysts also note that, unlike Yahoo, most Internet-related companies aren’t profitable and won’t be any time soon.
Even so, analysts noted that optimism has been returning to the equity market in general. Over the last month other tech sectors, notably biotech, have rallied sharply.
Many economists now believe that the Federal Reserve is finished with its yearlong campaign to tighten credit and slow the economy.
An interest rate peak is often followed by a powerful rally in stocks, the market’s bulls note.
“There are those who feel the Federal Reserve Board may have done its job--for now,” said Alan Ackerman, senior vice president at Fahnestock & Co.
“This just goes to show that the market has bounced back from its lows and appears ready to start retracing the upward trend we saw earlier this year,” Ackerman said.
Others are less sanguine, saying that the market still has to get through corporate-earnings-reporting season over the next three weeks without seeing too many signs that earnings have been hurt by the slowing economy.
Among Wednesday’s highlights:
* Major tech stocks rising with the Net rally included Intel, up $2.38 to $141.19; IBM, up $2.63 to $104.63; Gateway, up $3.56 to $70.94; and Oracle, up $2.38 to $74.69.
* In the telecom sector, beaten-down Qualcomm rebounded $8 to $61. Other gainers included Tellabs, up $3.25 to $73.31, and Wireless Facilities, up $3.31 to $64.
* Financial stocks gained on news of Swiss banking giant UBS’ takeover of PaineWebber. J.P. Morgan jumped $4.63 to $122.56, Federated Investors rose $1.75 to $38.44 and Franklin Resources rose $1.31 to $34.13.
* HMO stocks continued to rally on optimism about rising earnings. PacifiCare jumped $2.31 to $63.75 and Cigna leaped $3.06 to $102.88.
But drug stocks pulled back. Lilly fell $3.25 to $99.75 and Johnson & Johnson lost $2.13 to $98.06.
* “Old economy” stocks that had rallied in recent days in the wake of stronger-than-expected earnings were mixed. International Paper rose $1.13 to $35.63, but Alcoa eased 38 cents to $32.13.
* Krispy Kreme continued to slide, losing $2.13 to $62.88 on growth concerns.
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Market Roundup, C11-C12
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Back in Black
The Nasdaq composite index’s surge on Wednesday put it back in the black year-to-date, as it finished above the year-end 1999 close of 4,069.31. Weekly closes and latest:
Source: Bloomberg News
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A Rising Tide Doesn’t Lift All Boats
A better-than-expected earnings report from Yahoo late Tuesday sparked a hot rally in major Internet stocks on Wednesday. But the gains didn’t extend to some of the smaller Net players. A sampling of Net stocks:
Wednesday’s Internet Winners:
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Ticker 52-wk. Wed. Wed. Wed. pctg. Stock symbol high close change change GoTo.com GOTO $114.50 $15.56 $+5.25 +50.9% CNet Networks CNET 79.88 29.19 +7.75 +36.2 Chinadotcom CHINA 78.00 21.63 +5.69 +35.7 EBay EBAY 127.50 52.63 +8.69 +19.8 CMGI CMGI 163.50 43.44 +6.94 +19.0 Yahoo YHOO 250.06 124.94 +19.44 +18.4 VerticalNet VERT 148.38 46.75 +6.44 +16.0 Webvan WBVN 34.00 7.88 +1.03 +15.1 DoubleClick DCLK 135.25 31.50 +3.00 +10.5 Amazon.com AMZN 113.00 35.06 +1.94 +5.9 Wednesday’s Internet Losers: Garden.com GDEN 24.13 2.06 -0.47 -19.0 Cybercash CYCH 16.00 5.94 -0.31 -5.0 Prodigy Comm. PRGY 35.44 9.06 -0.31 -3.3 Tickets.com TIXX 32.00 2.97 -0.09 -3.1 Internet Amer. GEEK 27.00 4.63 -0.13 -2.6 Skymall SKYM 14.19 2.50 -0.06 -2.4 Autoweb.com AWEB 16.56 2.00 -0.03 -1.5
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Source: Reuters
