Tech stocks look for recovery

A glimmer of light falls on technology stocks this morning after being pelted by the hardest one-day point drop in Wall Street's trading history.

4 min read
It was the worst of times, followed by the best of times.

One day after the biggest one-day point drop ever yesterday, the market came back today with a wallop to post its biggest one-day gain.

The Nasdaq composite index gained 65 points and the Dow Jones Industrials gained 337 points, or 4.7 percent, to end the day 7,498.32, beating the record 257.36-point gain set on September 2 of this year.

So while the Dow charged back 337 points today to end the day at 7498, it is still off 217 points from Friday's close of 7715. It is also off 598 points from two weeks ago, when the Dow crawled back above the 8000 mark for the first time since August.

Initially, this morning's trading got off to a rocky start. The Nasdaq dropped 66 points and the Dow fell 190 points from its dour showing the day before, when the technology-laden Nasdaq fell 115.83 points and the mighty Dow plunged 554.26 points.

While the gains in late morning trading do not make up for yesterday's huge losses, they may indicate a stabilization of the markets after a whirling downward spiral that traders blamed on turmoil in the Hong Kong and Southeast Asia stock markets. Analysts and the White House continue to stress, however, that the economy is healthy and that the fundamentals of the economy remain strong.

"I'd like to ask all of us to remember that our economy is as strong and vibrant today as it has been in a generation," Clinton said in a speech this morning at a Chicago school.

"With unemployment and inflation at their lowest levels in two decades, with businesses and banks healthy and sound, new jobs being created every day, our economy is continuing to grow steady and strong," he said. "That's why we have to feel confident and continue our economic strategy."

While technology stocks are particularly vulnerable to shifts in the global markets because much of their business is tied to the region's economy, some of those recovering today are among the hardest hit yesterday.

Yahoo (YHOO), for example, gained 5-1/8 or 13 percent from yesterday's close of 38; Excite (XCIT) gained 16 percent to end the day at 26, from yesterday's close of 22-1/2; and Lycos (LCOS) gained as much as 21 percent to end the day at 25-7/8, from yesterday's close of 21-3/8.

In addition, Compaq (CPQ) gained 6-3/4 points to 67-1/4; IBM (IBM) gained 9-1/8 points to 99-1/8; Dell Computer (DELL) gained 9 points to 91; Intel (INTC) gained 10-1/4 to end at 85; America Online (AOL) gained 3-15/16; and 3Com (COMS) gained 3-3/4.

Bucking the trend was CMP Media (CMPX). The media company lost 6-1/4 to end at 18-1/8, after reporting yesterday that its Internet growth for the third quarter ending in September was less than expected. The company announced also that Internet revenues for the fourth quarter may be approximately $2 million to $4 million less than previously anticipated.

Paul Noglows, a digital media analyst at Hambrecht & Quist said, "With regard to the quality regarding the Internet names, investors are realizing that yesterday's sell-off may have been overdone."

There is a tendency for those stocks that have run up the most to get knocked back the hardest when investors get nervous, said another analyst who asked not to be named. "You have volatility built in already because these companies do not have a long earnings history," said the analyst. "[There's] not a long operating track record."

Because of the heavy volume of trading today, some investors had problems logging on to their online investing services. Nasdaq says it hit record volume today, with 1.37 billion shares trading hands.

One investor, Michael Amland, president of Benchmark Computers, told CNET's NEWS.COM today that, as a result of the wild market fluctuation, he was unable to log on to E*Trade or gain access to Schwab's Web site as of 9:00 a.m. PT today. He said he was able to access Datek, but that the site was very slow.

Schwab customers were greeted with a memo from the company that read, "Please be aware that all brokerage firms are experiencing high customer volumes due to volatile market activity. We at Charles Schwab are making every effort to provide our customers with the most accurate and timely information possible. However, the various exchanges may be experiencing delays in reporting stock quotes to all brokerage firms."

Tom Taggart, a Schwab spokesman, said customers accessing the company's Web site are experiencing delays due to a heavy volume of traders. "Yesterday we had unprecedented volume, but today might even be bigger. We try to plan, but then when people stay logged on to keep an eye on what is going on, others have a hard time logging on [at all]."

Alex Goor, executive vice president at Datek, said Datek set a record yesterday for volume and today may even pass that record. He noted that online trading has been challenging for some customers, but pointed out that the company already has added additional staff to answer phone and email inquiries.

E*Trade could not be reached for comment.

Analysts say yesterday might have been too much of a correction to the mushrooming high-tech stock market of late. As a result, the market events of yesterday presented an opportunity, because the underlying fundamentals haven't changed at all. "The market loses over 500 and in some cases it presents nothing more than an opportunity to get into a stock at a bit of a discount of where it has been trading," added the analyst.

Yesterday the Nasdaq fell 7.02 percent to close the day at 1,535.09 on volume of 919.6 million shares in early tallies. The Dow lost 7.2 percent to end the day at 7,161.15 on volume of 693.7 million.

Reuters contributed to this report.