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Stocks cut rally short

Internet stocks slip as the Nasdaq closes lower, but market newcomers EarthWeb and Fox still end the day strong.

2 min read
The stock market closed lower today, although some technology issues managed to gain as investors showed enthusiasm for market newcomer EarthWeb and cheered earnings news from Intel.

Blue chips took a breather as the Dow Jones Industrial Average closed down 40.16 to 8823.82. The Nasdaq Composite Index fell from early gains to close down 3.46 to 1862.16.

Trading was subdued today, with many on Wall Street now believing the Fed won't trim interest rates for the third month in a row when the Federal Open Market Committee meets next Tuesday. The central bank has been shaving rates in an effort to keep the economy from sliding into recession amid a global economic crisis.

"I expect stocks to stay in a pretty narrow range until the meeting unless the market can find another catalyst other than interest rates," said Charlie Payne, the head analyst at Wall Street Strategies.

He said the recent rally, which lifted the Dow toward the 9,000 level, was built on the assumption of more interest rate cuts.

"I think the key is to see if the Dow can stay above 8,800 going into the meeting," said Payne.

Two initial public offerings today received a warm welcome from investors. EarthWeb, a New York-based company, nearly tripled in value, ending up 34.25 to 48.25 on 11.5 million shares traded. The company sold 2.1 million shares in its initial offering at $14 per share.

News Corporation's Fox Entertainment Group shares soared in trading on the New York Stock Exchange. The producers of The Simpsons and The X-Files gained 2 to 24.5 on 48.1 million shares traded. News Corporation sold some 20 percent of Fox in the offering--124.8 million shares--at $22.50 per share. The $2.8 billion initial offering is the third-largest IPO in U.S. history to date.

Intel, the world's largest chipmaker, said yesterday that it expects fourth-quarter sales to surge as much as 10 percent from third-quarter levels. Stronger demand for personal computers has helped boost sales of its microprocessors, the company said in a statement.

Intel was the most actively traded stock on the Nasdaq this afternoon, with 31.4 million shares changing hands. Shares jumped 6.125 to 103.6875, a new 52-week high.

The news from Intel helped boost other technology companies, including Dell Computer, which gained 1.625 to 71.9375.

Excitement over expected strong online sales for the holiday season waned slightly this afternoon as Net issues lost early gains. Online auction company eBay gained initially, only to fall 11 percent to 115.9375. Net bookseller Amazon.com as well gained early before slipping 5.125 to 126.625.

Music retailer K-Tel, still riding the wave following its deal with Microsoft's shopping channel, MSN Shopping, gained 9.6875 or 42 percent to 32.625. The stock jumped more than 86 percent on the news yesterday. K-Tel shares have traded as high as 39.4688 and as low as 3.1875 in the past 52 weeks.

Intel is an investor in CNET: The Computer Network, publisher of News.com.

Reuters contributed to this report.