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Internet

Net stocks take a nosedive

The Nasdaq closes deep in negative territory after an erratic morning that saw schizophrenic Net stocks falling, rising, and falling again.

    The Nasdaq closed deep in negative territory today after an erratic morning that saw schizophrenic Net stocks falling, rising, and falling again.

    Investors have been concerned that possible interest rate hikes will slam Net issues especially hard, keeping them shrouded in a cloud of uncertainty. In the past, they have roared back after a major slump.

    Still, some analysts say the sector is unlikely to fall much further.

    "There has already been a correction," said Philip Leigh, an Internet analyst at Raymond James. "If you look in the rear-view mirror, a lot of these stocks are already down quite a bit."

    Internet issues were down nearly across the board, weighing heavily on the Nasdaq Composite Index, which fell 72.74 points, or 2.96 percent, to close at 2,380.78.

    The Dow Jones Industrial Average tumbled 123.58 points, or 1.16 percent, to close at 10,531.09.

    Amazon.com, which fell 8.6 percent yesterday, fell 5.75 points to 111.75. America Online, which sank 5.49 percent yesterday, was down 4.38 points at 115.13.

    Yahoo fell 10.94 points to 126.94 after an 8.88 percent fall yesterday, and E*Trade fell 4.94 points to 45.06 on the heels of yesterday's 5.88 percent fall.

    "I think the barometer to watch is the IPOs," Leigh said. "If we start to see more Internet IPOs falter, I think you will see the stocks generally will falter some more."

    Shares of Barnesandnoble.com shot as much as 44 percent higher on the company's first day of trading--far below the stratospheric rise of other recent Internet IPOs.

    Analysts note, however, that the online bookseller's performance on the after-market has less to do with the company itself and more with the general unease in the market toward Internet stocks.

    "Two months ago, this stock would have been up 200 percent," said Ken Fleming, an analyst with Renaissance Capital IPO Fund. "The recent market shakiness has people exercising more caution."

    Barnesandnoble.com rose 27.43 percent, or 4.94 points, to close at 22.94. It entered the market priced at $18 per share.

    "Investors aren't dumb. They have seen what has happened with a lot of Internet IPOs," said Fleming, referring to issues that shot up as much as 200 percent on their first day of trading in recent months but later gave back a lot of those gains.

    "So I think we are seeing less exuberance and more sanity in trading," Fleming concluded.

    Lycos, which was strong throughout the day, ended 1.25 points lower at 96.5 despite being added to the Nasdaq-100 and being upgraded to a "buy" from "hold" by investment bank Credit Suisse First Boston.

    Excite, which also traded in positive territory for most of the day, closed down 1.13 at 116.94.