Internet stocks today continued their double-digit declines in early trading and the Nasdaq fell to levels not seen since mid-June of last year.
"We are looking at another ugly day here," said Peter Cardillo, director of research at Westfalia Investments. "It's the falling dollar and world markets, which are down substantially."
The technology-heavy Nasdaq Composite Index took a severe beating in early trading to drop 105.52 points. But by the end the day, it closed at 1419.12, down 43.49 points. That, nonetheless, pushed the index to a near 16-month low, despite better-than-expected earnings news recently from several technology companies, including chipmaker Advanced Micro Devices in the past few days.
In sizing up the market's performance today, analyst Keith Benjamin with BancBoston Robertson Stephens, said: "Ninety percent of the decline was the world fell apart this morning and 10 percent was fear that all the good news for Internet stocks is already out."
He noted that last quarter, Internet stocks moved up in anticipation that Yahoo would have a good quarter and then fell after it reported, as investors captured gains.
"I feel a lot of stocks are near their bottom," Benjamin said. He noted that E*Trade's stock is a cheap buy, given its market cap is $800 million and yet its has $600 million in cash alone.
Excite continued to fall by double-digits today, closing down 14.46 percent at 29.0312, down 4.9 points. That comes on top of a 12.28 percent decline from yesterday, when it closed at 33.9375, down 4.75 points.
Infoseek found itself in a similar situation today, plummeting nearly 10 percent to close at 18.50, down 2 points. Yesterday, Infoseek closed down 15 percent at 20.50, down 3.6250 points.
Yahoo also dropped 8.36 percent to end the day at 104.8125, down 9.5625 points from yesterday.
Some analysts remained bullish, however. Morgan Stanley's Mary Meeker increased her estimates for Yahoo's 1998 and 1999 performance.
Meeker increased her 1998 revenue estimates for Yahoo to $190 million from $171 million and net income for the year to 42 cents for the year, up from 33 cents. And for 1999, she increased revenue estimates to $325 million from $270 million and net income to 65 cents a share, up from 49 cents.
"We believe these estimates for Yahoo's highly leverageable business are again conservative," Meeker noted in a research report.
The Dow Jones Industrial Average also took a plunge in early trading, falling as low as 274.20 points. But it recovered some of its loss to end the day at 7731.91, down 9.78 points over yesterday. Although the Dow took an early plunge, it was still short of the 513-point free-fall seen on August 31, when it ended the day at 7,539.07. Analysts said U.S. stocks tumbled in early trading, following a plunge in the dollar and sharp losses in the European and Asian markets.
Japan's Nikkei Index plunged nearly 6 percent overnight, and London's FTSE 100 was down more than 3.5 percent at midsession amid disappointment at the Bank of England's quarter-point interest rate cut. Some investors had hoped for a bigger cut.
Overnight, the dollar swooned to a 15-month low against the yen. The greenback has fallen more than 16 percent this week.
To make matters worse, Federal Reserve chairman Alan Greenspan hinted that the economy was weakening and may be headed toward a recession.
Greenspan's comments yesterday did raise hope that there may be another interest rate cut to try to keep the economy on track in the face of a looming credit crunch triggered by global financial turmoil.
He added that the Fed was almost certain that the U.S. economy would slow, particularly because lenders were becoming nervous and avoiding risk, withholding capital even from solid companies that want to borrow funds.
"The uncertainties continue to increase," Cardillo said. "The market doesn't like any of this."
Reuters contributed to this report.