Nasdaq Battered by AOL Rumor, Interest-Rate Fears
By Karyn McCormack and Monica Rivituso
RUMORS THAT subscriber growth could be slowing at America Online (AOL) only added another cold
blast to the chill that came over tech stocks Tuesday. The tech-heavy Nasdaq index tumbled as much as
2.3% during trading, before creeping up in the afternoon to end the session down 35.64 points, or 1.4%.
The Nasdaq is now down 9.7% from its all-time high of 2864.48 on July 16. And with the threat of higher
interest rates looming, market-watchers think that tech stocks could see more bad days ahead.
A rumor flew around trading desks Tuesday that AOL could see a slowdown in subscriber growth this
quarter from last quarter. AOL stock fell as much as 7.4% before the company's president, Ted Leonsis,
said at a BancBoston Robertson Stephens technology conference that the seasonally slow summer has
"never been stronger" and that its fiscal first quarter (ending September) "looks very, very strong,"
according to Dow Jones Newswires.
But the reassurance from AOL didn't help its Internet cousins much. The Dow Jones Internet index fell
5.9% Tuesday. "Tech's really taking it on the chin," said Peter Coolidge, a trader at Brean Murphy. Art
Hogan at Jefferies & Co. also said that technical indicators for the whole market looked "lousy," but that
it's nothing to lose sleep over.
Indeed, a few stocks acted as if nothing is awry. Intel (INTC) shares actually hit a new high during the
day of 73 9/16; the chip giant is seeing strong demand. Hogan also noted he hears that PC sales are
strong. That would help explain the rise in Hewlett-Packard (HWP), which was the second-largest
percentage gainer in the Dow Jones Industrial Average on Tuesday. In fact, while the Nasdaq fell, gains in
consumer stocks such as Procter & Gamble (PG) and Johnson & Johnson (JNJ) lifted the Dow.
Still, the big weight on investors' shoulders continues to be uncertainty surrounding interest rates. The
Federal Reserve may have enough evidence that inflation is creeping back by the time it meets Aug. 24,
Hogan said. Thursday's productivity report and Friday's employment report will get even more attention.
Some people might be taking a wait-and-see approach until that report comes out. "I don't see a lot of
people rushing to buy stocks before we see what that number holds," said Coolidge.
In this environment, Tony Spare, chairman of San Francisco money management firm Spare, Kaplan,
Bischel & Associates, is sticking to his contrarian value approach when picking stocks. "Valuation of the
10 to 15 largest-cap stocks is outrageously high," Spare said. "We buy inexpensive stocks that are
neglected," he said, noting that he holds positions for three to five years -- an eternity to today's day
traders. Spare said he is adding to his positions in Manpower (MAN), International Flavors and
Fragrances (IFF), Lubrizol (LZ) and Ford (F), but is trimming back on telephone and energy stocks.
<< MARKET TODAY ARCHIVE |
