Net stocks sag on downgrades
The Dow and the Nasdaq fail to get a boost from the usual Internet suspects, which are turning downward after being downgraded by some Wall Street analysts.
The Dow Jones Industrial Average plunged 228.63 points or nearly 2.5 percent to close at 9,120.93. At one point today the blue chip index was down by as much as 261.84 points. Yesterday, it fought back from a 261-point plunge to end the day only 125.12 points lower, at 9,349.
The Nasdaq Composite Index slipped 39.92 points or 1.72 percent to close at 2,276.89. The index also managed to claw its way back from a deep hole yesterday, closing only slightly lower.
Markets apparently failed to get a boost today from Internet issues, which recently have propelled the Nasaq to record levels, after several Wall Street analysts cut their ratings outlooks on key companies.
The three major Web portals--Yahoo, Excite, and Lycos--initially edged higher today, against all reason, after Deutsche Bank Securities analyst Alan Braverman cut his ratings on the companies. Eventually, however, they turned lower.
Although Braverman is bullish on the long-term prospects of the Internet sector, he is concerned about their high valuation multiples in the near term. He said he thinks they have grown faster than underlying business opportunities.
Yahoo dropped 6.52 percent after being cut to "accumulate" from "buy" by Deutsche Bank. The issue also was cut to "buy" from "strong buy" by BT AlexBrown, and to "hold" from "buy" by Jefferies & Company.
The rounds of cuts come on the heels of a better-than-expected earnings report for the leading Net portal.
Deutsche Bank also lowered its ratings on Excite and Lycos, dropping them both to "accumulate" from "buy." The stocks fell 6.13 percent and 11.54, respectively.
In the PC sector, Apple Computer got mixed news today.
Influential investment bank Salomon Smith Barney downgraded the personal computer maker to "neutral" from "buy." Quoting an unnamed source, Reuters reported that Salomon analyst Rich Gardner thought Apple only made its quarterly earnings numbers because it stuffed the product channel.
"[Apple] might not make next quarter's numbers," the source said.
But another influential bank, Donaldson, Lufkin & Jenrette, upgraded Apple to a "buy" from a "market perform."
Shares of Apple tumbled 11.02 percent today.