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Market Close: Internets stumble again

Internet stocks were routed again Tuesday but blue-chip stocks helped the Dow reverse its fortune in late trading. The Dow closed up 37 points to 10,596.26 while the Nasdaq composite shed 58 points to close at 2,412.55.

Already skittish investors were put off by a report from the National Association of Purchasing which said manufacturing activity rose to 55.2 from a 52.8 level in April.

"This raises the chance that the Fed will raise short-term interest rates," said Hugh Johnson, chief investment officer at First Albany Corp.

A rise in the cost of materials tends to get added into the price of products, leading to inflation. The Federal Reserve, which left rates untouched unchanged at 4.75 percent at its last meeting on May 18, said it would raise rates if the economy continued to accelerate.

Most analysts are betting the Fed will raise rates at its June 30 meeting.

After showing some signs of life late last week, Internet stocks resumed their retreat.

Amazon.com Inc. (AMZN) plunged 12 15/16 to 105 13/16 after a Barron's story reiterated the challenges that lie ahead for the online retailer. Barnesandnoble.com Inc. (BNBN) closed off 3 5/16 to 20 on expectations that the Federal Trade Commission will oppose its parent's merger with Ingram Books, a book distributor. America Online Inc. (AOL) fell 6 1/8 to 113 1/8 and Yahoo! Inc. (YHOO) dropped 9 13/16 to 138 3/16.

Excite Inc. (XCIT) was unchanged at 133 while Lycos Inc. (LCOS) and Infoseek Corp. (SEEK) lost 7 3/4 and 2 5/16 a share, respectively.

PC stocks didn't do much better.

Hewlett-Packard Co. (HWP) sank 4 3/16 to 90 1/8. Dell Computer Corp. (DELL) shed 1 3/8 to 33 1/16 and Compaq Computer Corp. (CPQ) lost 5/8 to 23 1/16. Gateway Inc. (GTW) chopped off 1 to 59 13/16 but Apple Computer Inc. (AAPL) closed up 3/4 to 44 13/16 after an upgrade from Salomon Smith Barney.

Among widely held networking stocks, Cisco Systems Inc. (CSCO) fell 1 15/16 to 107 1/16; Ascend Communications Inc. (ASND) dropped 3/4 to 91 15/16; Lucent Technologies Inc. (LU) dropped 11/16 to 56 3/16 and 3Com Corp. (COMS) ended off 1 1/4 to 26 1/16.

Complete Business Solutions Inc. (CBSI) fell 7 7/8 to 16 3/8 services provider SG Cowen cut its rating to "buy" from "strong buy," citing weaker demand and project delays of its customers. It also said 1999 earnings and sales would fall short of expectations.

Dialogic Corp. (DLGC) managed to shoot up 10 1/16 to 43 7/16 after Intel Corp. (INTC) agreed to buy the networking products maker for $780 million in a cash tender offer. Intel closed off 3 3/8 to 50 11/16 and IBM Corp. (IBM) slid 4 to 112.

E*Trade Group Inc. (EGRP) plunged 5 3/16 to 39 5/16 after agreeing to buy Telebanc Financial Corp. (TBFC) for $1.8 billion. Telebanc closed up 8 to 74 1/2.

SilkNet Software Inc. (SILK) inched up 3/8 to 37 7/8 after its underwriters began coverage of the e-commerce software company. BancBoston Robertson Stephens and Credit Suisse First Boston both initiated with "buy" ratings.

Microsoft Corp. (MSFT) chopped off 2 3/16 to 78 1/2. Sun Microsystems Inc. (SUNW) lost 3 3/4 to 56 and Oracle Corp. (ORCL) closed up 1 1/8 to 25 15/16.

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