Online Brokers Drag Sector, IPOs Lower
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Internet stocks were the victim of a broad sell-off that started after a negative report on Internet brokers was released and lasted throughout the session, claiming the day's IPOs as victims.
internet.com's Internet Stock Index plunged 21.15, or 4.71 percent, to 427.61 and the Nasdaq Composite fell 35.63 to 2,588.00. The Dow Jones industrial average bucked the trend, ending up 31.35 to 10,677.31
Online brokers were lower across the board, with E*Trade Group Inc. (EGRP) losing 4-5/16 to 24-11/16, Ameritrade Holding Corp. (AMTD) falling 2-3/4 to 21-1/4, Charles Schwab Corp. (SCH) tumbling 4-15/16 to 37-1/2, DLJdirect (DIR) down 2-1/2 to 18-5/8 and Southwest Securities Group (SWS), parent of mydiscountbroker.com, shedding 4-13/16 to 37-3/8.
In his latest report on the industry, Credit Suisse First Boston's Bill Burnham predicted Internet brokers may see their first decline in trading volume in the third quarter. Part of the reason, Burnham said, was online investors tend to favor Internet stocks which are currently in decline.
"It is probable, but not definite, that Q3 may witness the first-ever sequential decline in online trading volumes. Weakness in Internet stocks appears largely to blame," he wrote.
It was a very bad day for Internet IPOs as all ended below their offering price. That came despite the fact that two of the four revised their price range downward before going public.
Finally, Bigstar Entertainment (BGST) shed 1-27/32 to 8-5/32. The online retailer of videos, DVDs and laserdiscs sold 2.5 million shares at $10. Originally, the company planned to sell 3.1 million shares between $12 and $14.
Business Week online reported Yahoo! was considering paying more than $17 billion for Excite@Home, although Excite@Home chief George Bell Tuesday denied the report.
After posting significant declines, the sector's leaders recovered some ground and a few even ended in positive territory. CMGI Inc. (CMGI) fell 6-7/16 to 81-7/8, Amazon.com Inc. (AMZN) gained 7/8 to 94-7/8, Infoseek Corp. (SEEK) lost 3-1/2 to 34, eBay Inc. (EBAY) gave back 6-7/8 to 84-3/8 and Drugstore.com (DSCM) plunged 6-13/16 to 38.
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