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MIDDAY MARKETS: Oracle and Intel burst large-cap bubble

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Downgrades for Oracle and Intel put a damper on the euphoria for large-cap companies at midday Monday.

The Nasdaq fell 92.61 points to 2,070.80, and the Dow Jones industrial average slipped 74.95 points to 10,504.90. The Inter@ctive Week @Net Index fell 12 to 195.52.

"In order to participate in the revival of the tech sector, investors presently seem to be willing to "pay up," wrote Friedman, Billings, Ramsey analyst Ulric Weil in a Monday note entitled "Large-Cap Tech Euphoria--Will It Last?"

The analyst noted that as the technology sector has continued to melt, investors have been migrating to the large-cap technology companies--those with a market capitalization of over $5 billion--with global brand recognition. As a result, "valuations of the stocks of these companies again are approaching lofty levels," Weil wrote. "The very volatile stock market may provide investors with a better entry point in the next couple of months," he cautioned.

Downgrade reports for Intel and Oracle Monday both focused on the fact that these companies' stocks have skyrocketed over the past two weeks; this is considered a premature recovery because neither company has hit its true bottom.

Companies that slumped after Merrill Lynch analyst Joseph Osha issued a "reality check" for the group are: Intel (Nasdaq: INTC) , down $1.42 to $31.01, and communications chipmakers Applied Micro Circuits (Nasdaq: AMCC), off $3.96 to $26.04, PMC-Sierra (Nasdaq: PMCS), down $4.86 to $39.95, and Vitesse Semiconductor (Nasdaq: VTSS), off $1.77 to $33.

CNET's semiconductor index declined 6 percent

It's still early in Oracle's (Nasdaq: ORCL) fourth quarter, but Lehman Brothers sounded alarm bells that it partially based on Sun Microsystems' (Nasdaq: SUNW) earnings report last week. Oracle fell $1.86 to $17.89, while Sun shed $2.04 to $17.67.

Other large-cap stocks on the decline included Cisco Systems (Nasdaq: CSCO), off $1.56 to $17.59, and Microsoft (Nasdaq: MSFT), down $1.83 to $67.17.

Shares of Exodus Communications (Nasdaq: EXDS) gained $1.08 to $11.05 on take-over rumors, but at least one analyst downgraded the stock based on concerns about growth.

Telecommunications company SBC Communications (NYSE: SBC) fell 96 cents to $39.04 after it matched already lowered expectations for its first quarter, but warned that the rest of 2001 would fall short of estimates.

Compaq (NYSE: CPQ), which reports its results after Monday's bell, was down 79 cents to $20.72.

Amazon (Nasdaq: AMZN) was up 63 cents to $16.41, AOL Time Warner (NYSE: AOL) fell $1.43 to $ 47.26 and Yahoo (Nasdaq: YHOO) was off $1.03 to $18.82.

ZDII staff and Reuters contributed to this roundup.