He's everywhere -g-
>>By KENNETH N. GILPIN
NEW YORK -- Stock prices were battered Tuesday in a broad-based selloff that hit not only high-flying technology and Internet issues but also blue chips and small companies.
The decline was most pronounced among Nasdaq stocks, which so far this year have posted the biggest gains. But the Dow Jones industrial average fell to its lowest level since Jan. 22, a performance that erased its gains last month and left the index below where it started the year.
The Standard & Poor's 500 index, which had been held aloft by the stellar performance of a handful of stocks, also plunged, leaving it in negative territory for the year. The Russell 2000 index of small company issues, which has badly lagged the performance of other market indexes, slumped.
Internet stocks, under heavy selling pressure for the past few sessions, were hammered again Tuesday. Still, a key index of Internet stock performance is well ahead for the year.
The sharp drop in prices was not the product of frantic trading: Volume on the New York Stock Exchange was a relatively modest 713.6 million shares. And it was not caused by unexpectedly bad news. Analysts attributed the market's behavior to what they called the need for a correction after the sharp ascent by market averages since October.
"This is healthier than the alternative, which is that the market's valuation becomes twice as large as the country's gross domestic product," said William Meehan, the chief market analyst at Cantor Fitzgerald. "The pullback we are seeing is still well within what many bullish people call a moderate correction."
By the close of trading, the Nasdaq composite had shed 94.13 points, or 3.9 percent, to 2,310.79. It was the worst drop for the index in four months and its third-biggest point decline ever. Since it peaked on Feb. 1, the Nasdaq composite has declined by 8 percent. Still, it rose so much in January that it is up 5.4 percent for the year.
The Dow average lost 158.08 points, or 1.7 percent, to 9133.03. Of the 30 stocks that make up the index, only three -- J.P. Morgan, Coca-Cola and United Technologies -- rose in price Tuesday. For the year, the Dow is now down a half percent.
The Standard & Poor's 500 index, which for some time has been sustained by high-flyers like Microsoft, Intel, Cisco Systems and Dell Computer, fell sharply, as prices of those issues plunged. The index closed at 1,216.14, down 27.63, or 2.2 percent. Since it peaked on Jan. 29, the index has declined 5 percent. It is now down 1.1 percent for the year.
As the year began, a number of analysts were predicting a comeback for small company shares. Compared with the prices of large cap stocks, they looked inexpensive. Thus far, that forecast has been inaccurate.
The Russell 2000 index, a broad proxy for small company stocks, fell 8.20 points Tuesday, or 2 percent, to 403.13. For the year, the index is now down 4.5 percent.
And then there are Internet stocks.
Many forecasters labeled the sharp run-up in Internet stocks over the past few months a mania, and said they were looking for a sharp correction. That may be what is happening.
On Tuesday, TheStreet.com's index of 20 leading Internet issues fell 48.59, or 9.6 percent, to 456.26. Since its peak on Jan. 11, the index is down 22.5 percent. Still, for the year the index is up 12.2 percent.
"What you are seeing is a correction of the leadership stocks of December and January, technology and the Internet," said Marshall Acuff, an equity strategist at Salomon Smith Barney. "That is happening because prices of these stocks had gotten way ahead of themselves" relative to their earnings' prospects.
In recent weeks, a number of analysts have said the decline in Internet issues would be triggered by a sharp increase in the supply of stock in these companies.
Network Solutions, a company which has the exclusive right to assign Internet addresses, was the victim of that phenomenon Tuesday.
The company announced that 4.58 million of its Class A shares were sold at $170 each in a secondary offering. The increase in supply encouraged many to sell, and Network Solutions fell 26 1/8, to 148.
The market's high valuation on Lycos Inc., the No. 3 Internet search directory, did not stand up Tuesday.
Lycos, which since the start of the year has been the market's tenth-best performer, was pummeled Tuesday after USA Networks Inc., a media company, said it had agreed to buy Lycos in a transaction that implied a far lower market price for Lycos.
Lycos fell 33, to 94 1/4, after USA Networks valued the combination at $22 billion, an amount analysts said implies a price of $91 a share for Lycos.
"The Lycos deal was the dominant factor in what was a very poor day for Internet stocks," said Paul Cook, lead portfolio manager for Munder Capital's NetNet fund. "That was why a lot of players decided to move out of a lot of these companies."
Among other leading Internet stocks, Yahoo! fell 17 7/8, to 140 3/4. And Amazon.com lost 9 1/8, to 100.
Stocks of much bigger companies that have profited from their exposure to the Internet also fell back.
AT&T dropped 3 5/8 to 87 3/8. Cisco Systems fell 6 to 95 15/16. And Microsoft declined 5 3/16, to 160 1/16.
Among Dow stocks, Merck was the biggest loser, falling 5 1/8 to 145 1/8. And IBM declined 4 5/8, to 162 3/8. << |
