Wall Street was down in mid-afternoon trading Thursday amid growing fears of a coming hike in interest rates. Tech stocks took the brunt of the beating as traders sold off shares before all their recent profits could evaporate.
Meanwhile, the lights went out again at ETrade, but this time investors were more sympathetic toward the online broker's plight. Many, in fact, view this week's glitches as a prime buying opportunity.
The Dow Jones Industrial Average fell 70.03 points to 9296.78, and the Nasdaq Composite Index was 51.04 lower at 2442.37. The S&P 500 shed 17.80 to 1254.27.
After the Fed decided Wednesday to leave interest rates unchanged for the time being, speculation is growing that an increase is in the cards the next time Greenspan & Co. get together. The latest signs of robust US economic growth come in the form of fewer-than-expected weekly jobless claims in December, as well as surprisingly strong factory orders.
Adding to investors' anxiety was word from JP Morgan Securities that its equity strategist, Douglas Cliggott, is reducing the stock allocation in his model portfolio to 50 percent from 60 percent, and is boosting his cash holding to 25 percent from 15 percent.
High-flying tech shares were among the first to go for many traders looking to follow Cliggott's example. "People are nervous about these high valuations," said Art Russell, an analyst with Edward Jones. "How many new highs has the Nasdaq set this year? More than a dozen. At some point, you just take profits."
No wonder, then, that Dell Computer (DELL), International Business Machines (IBM), Microsoft (MSFT), Cisco Systems (CSCO) and Intel (INTC) all lost ground. But no one in the tech crowd fell harder than chipmaker Advanced Micro Devices (AMD), which tumbled 11 percent to US$18.56 after mysteriously canceling appearances at a pair of upcoming investment conferences. Some bad news is coming for AMD -- that's the buzz on the Street.
The rumor mill also was hard at work on reports that Thomas Kurlak, Merrill Lynch's influential chip analyst, had badmouthed both AMD and Intel during an in-house teleconference with brokers. This is being interpreted as a sign that news of the semiconductor industry's rapid recovery was greatly exaggerated.
On the Internet front, ETrade Group (EGRP) advanced 25 cents to $55.50 even as its system went kerblooey for a second day in a row, preventing many customers from making trades. The crashes stem from a software change Tuesday night, and you can be sure the company's tech squad is working overtime to fix this mess. ETrade processes more than 40,000 trades every day -- when the system is up and running, that is.
On the other hand, the growing ranks of online investors is sweet music for the numerous boutique brokerages that might not otherwise swim with the big fish. Siebert Financial (SIEB) surged 21 percent to $59.84 (it was up no less than 90 percent a day earlier), and MH Myerson stock (MHMY) exactly doubled to $14.88. Charles Schwab (SCH), by comparison, was reaching for its asthma medicine and slipping 25 cents to $67.75.
CDNow (CDNW) climbed 50 cents to $23.50 after joining the earnings chorus with a fourth-quarter loss of 73 cents a share. Analysts had been expecting 76 cents, so this was just fine, especially with revenues up more than 160 percent from a year before. CDNow's merger buddy N2K (NTKI) was 6 cents higher at $16.88 as it posted a better-than-expected loss of $1.24 a share.
Lastly, MCI WorldCom (WCOM) inched up 6 cents to $78.13 after it ended speculation concerning its plans to splash back into the Internet pool. The telco said it's teaming with America Online's CompuServe unit to offer residential customers Net access for $16.95 a month -- as long as they're also MCI long-distance clients.
One-stop shopping has been the rallying cry of the telecom business for years. Looks like it's finally panning out.
