RealTime IT News

Stocks Party, But Nets Stay Home

Stocks cheered signs of slowing in a weaker-than-expected June employment report, but Internet stocks missed out on the celebration after a downgrade to Yahoo.

The ISDEX lost 4 to 738. But broader indexes soared. The Nasdaq gained 62 to 4023, back above the important 4000 level. The Dow soared 154 to 10,635, its biggest one-day gain since late May, and the S&P 500 rose 22 to 1478. Volume fell slightly on the NYSE to 932 million shares, and was unchanged on the Nasdaq at 1.47 billion shares. Advancing issues led 18 to 10 on the Big Board and 20 to 18 on the Nasdaq.

Non-farm payrolls added 11,000 jobs in June, well under the 245,000 expected by analysts. However, the numbers were skewed by temporary census workers leaving their jobs. The private sector added 206,000 jobs in June. The unemployment rate shrank to 4.0%, and wages rose 0.4%, both in line with expectations. Yahoo will kick off earnings season July 11, and Ariba will follow on July 12. The Producer Price Index for June will come out July 14.

Yahoo fell 5 5/8 to 116 3/4, hit by a downgrade to Buy from Strong Buy by Deutsche Banc Alex. Brown analyst Andrea Williams Rice, based on valuation. Her valuation model was based on a 30% annual return in Yahoo's stock price for five years, giving the company a market cap of 250 billion. To attain that, she said Yahoo will need a price-to-earnings ratio of 30 at that point. To do that, Yahoo would need to generate 8 billion in earnings and 30 billion in revenue in five years, or an annual growth rate of 111%, three times her projected growth rate for the company. However, other analysts pointed out that leading tech stocks trade at PEs of 50 or higher.

Goldman Sachs reiterated Recommended List on Yahoo. Robertson Stephens said it is expecting declining advertising to hurt second-tier portals, but that it expects Yahoo and AOL to "remain largely unaffected." Key support on Yahoo is around 111. eBay fell 1 1/4 to 49 3/4, just below key support at 50.

Rice also downgraded FairMarket , off 55/64 to 5 5/16, Safeguard Scientific , down 1 15/16 to 30 1/2, and TMP Worldwide , off 2 15/16 to 73. She said other stocks vulnerable to slower revenue growth are About.com , off 1 1/8 to 30, Lycos , up 1/16 to 49 5/16, and AOL , up 1/2 to 56 5/8. Rice said that earnings season "could bring more bad news for the sector," but expects earnings for the stocks she follows to be in line with estimates or better. She upgraded HotJobs , which soared 2 31/32 to 15 25/32 amid otherwise negative comments.

BroadVision plummeted 13 1/16 to 40 9/16 after losing an American Airlines contract to rival Art Technology , which soared 19 to 113 1/2. SG Cowen said BroadVision is having trouble implementing technology with key customers, and that growth may be slowing. Interwoven , which also won a contract from American Airlines, soared 11 1/4 to 131.

Internet infrastructure plays resumed their leadership. Corning rose 8 9/16 to 256 11/16, Juniper Networks added 7 11/16 to 148, SDL gained 10 1/16 to 294 1/2, and JDS Uniphase recouped 2 1/4 to 116 1/4 on a positive mention in Barron's. Sycamore Networks soared 16 3/16 to 126 3/8 on a $420 million multi-year contract win from 360 Networks and a CS First Boston Buy rating.

Software.com fell 1 9/16 to 115 after trading as high as 126 on news of an alliance with ALLTEL .

VerticalNet rose 2 3/16t