Internet stocks hit hardest by market drop
Reuters Story - August 31, 1998 19:39
%BUS %ENT %DPR AMZN YHOO INKT SEEK DELL CSCO V%REUTER P%RTR
By Duncan Martell
PALO ALTO, Calif., Aug. 31 (Reuters) - As stock market investors ran for the exits on Monday, Internet stocks got trampled first, driving the Nasdaq index to its biggest point decline ever.
"The market has knocked some of the Internet fairy dust off of these stocks," said Jim Balderston, analyst at Zona Research. "And they're probably still overvalued."
After slipping $13.11 on Friday, online bookseller Amazon.com Inc. plunged $22.14 to $83.75, Yahoo! Inc., the largest online directory, tumbled $14.06 to $69, search engines Inktomi Corp. was down $11.06 to $49 and Infoseek Corp. fell $4.19 to $17.
The Nasdaq plunged 140.43 points, or 8.56 percent, to 1,499.25, eclipsing its previous record for a one-day decline of 115.83 points set in October. In percentage terms it was the fourth-largest loss for the technology-heavy index.
Fears of a global recession pummeled the Dow Jones industrial average, erasing its gains for the year to date, as developments in Russia offered little hope of an immediate fix to that nation's economic and political crisis and government reports suggested U.S. economic growth was slowing.
But money managers said the main change in the outlook for Internet stocks was not fundamental factors such as earnings, but investor psychology.
"The moves today have much more to do with psychology," said Richard Slinn, a money manager at San Francisco-based Levensohn Capital Management LLC.
"All the negative things you could have said last week about Internet stocks when they were 25 percent higher, you could say again today."
Indeed, for many of the Internet stocks the main question has been when will they post earnings that would justify their stock prices.
The Nasdaq drop was not confined to cyberspace.
Dell Computer Corp. and Cisco Systems Inc. -- companies with products sold in the corporeal world -- also posted heavy drops as investors reevaluated whether those share prices could stand up to a global slowdown.
"People are thinking global recession now," said Duane Eatherly, a money manager at BancOne Investment Advisors of Columbus, Ohio.
The stock of Dell, the biggest direct seller of personal computers, dropped $18.75 to $100, 29 percent below its high of $129.375 a share set just last Wednesday.
Cisco, the top maker of equipment that links computers and networks, lost $12.81 to $81.875, well down from its high for the year of $105.25 reached last week.
"This is just serious carnage," Eatherly said. |
