The technology industry was among the market sectors hardest hit by the stock drubbing on Wall Street today, and many Web sites were sluggish or jammed as investors rushed online to trade or get information.
The Nasdaq composite index
fell 115.83, or 7.02 percent, to 1,535.09 on
volume of 919.6 million shares in early tallies, its largest
one-day point drop
ever. The Dow Jones Industrials lost 554.26 points, or 7.2 percent, to
7,161.15 on volume of 693.7 million, also the largest one-day point decline.
Internet stocks, among the high fliers in the recent run-up on Wall Street,
also were among the biggest losers today. Yahoo (YHOO), for example, lost 20
percent of its value in a single day.
The popular Internet directory, which opened the day trading at 20 to 25 times its 1998 revenue
expectations, ended down at about 16 times its 1998 revenues.
Indeed, the biggest casualties in today's stock turmoil were those of navigational companies.
One analyst who asked not to be named said Yahoo, Excite (XCIT), Lycos (LCOS), and
Infoseek (SEEK) suffered because they are the ones who posted huge gains in recent weeks. "They have had momentum plays, so they will get hit hardest [when investors get nervous]."
However, Derek Brown, an analyst at Volpe Brown Whelan noted that these companies are being affected by the market as a whole, not fundamentals.
"With the market going down, these are the
ones that people are going to sell out of because their valuations are
lofty," Brown said. "[The search stocks] have had absolutely enormous run-ups
in price in recent weeks and valuations are up considerably."
Brown said also that investors aren't yet comfortable in general with the valuation perimeters of high-tech stocks. It is difficult to gauge what is the norm, he said, because it is a relatively new
sector and lot of companies don't have earnings. As a result, it difficult to forecast in the current market, especially given that it is the potential that Internet companies offer that has made them so attractive.
"I actually think it's healthy for a lot of these [Internet] stocks to go
through a serious correction," said Mary Meeker, managing director for
Morgan Stanley. Meeker remains bullish on the sector, however, because she
thinks the fundamentals for the Net remain solid. "The fundamentals did not stop growing today," she added.
Trading was suspended late today under rules implemented in the aftermath
of the October 1987 market collapse. For many traders and investors, the
slide brought back memories of that "Black Monday" on October 19. That
marked the biggest one-day percentage decline, a 22 percent drop.
Traders blamed today's slide on turmoil in the Hong Kong and Southeast Asia
stock markets. Technology stocks are particularly vulnerable to shifts in the global markets because much of their business is tied to the region's economy.
Of late, analysts feel the market has defied logic. The potential weakness in Asia has triggered fears about weakness in the U.S. because that means there will be less demand for American products overseas, PC and otherwise.
"Many investors have lost sight of the situation. Are we
leading or following? It has turned into the snowball effect," said Brown.
The White House sought to calm jittery investors. "The market has taken
breathtaking drops in the past, so let's just be calm and reasonable,"
White House spokesman Mike McCurry told a news briefing in Washington. He
said the U.S. economy still was strong
Among the decliners include the following: Microsoft (MSFT) fell 6-1/2 to 128-7/8; IBM (IBM) dropped 8 to 90;
Intel (INTC) dropped 5-1/4 to 74-3/4; and Compaq (CPQ) declined 8-1/4 to 60-1/2.
Online (AOL) dropped 13-3/16 to 74; Yahoo sunk 9-9/16 to 38; Netscape (NSCP) dropped 2-5/16 to 29-5/8; Cisco Systems (CSCO) dropped 7-3/8 to 72-7/8; and 3Com (COMS) fell 2-15/16 to 42-7/8.
The Internet, with all its promise as a real-time, interactive information
source, didn't always deliver what user's wanted. "HTTP/1.0 Server Too
Busy," was the message greeting users who logged into Nasdaq.com. Users
reported that other financial news sites also were sluggish.
E*Trade reported a record number of users and a record volume of trades
today. Despite the heavy load, the company was able to execute and confirm
trades on time, a company spokeswoman said.
Schwab's Internet trading was slow at times, but it was up and running throughout the day, a spokesman said. He also said online volume was high.
"I don't understand why the technology sector got hit so badly,
but if the market goes through circuit-breakers early again tomorrow morning, the Nasdaq will likely get ripped, too," Michael Murphy, editor of the California Technology Stock Letter, said in a statement. "If
this is going to be a crash, it will happen tomorrow morning when
margin selling kicks in on the one side while [Alan] Greenspan and
[Robert] Rubin will be on the other side [trying to calm market
Reuters contributed to this report.