Internet Stocks Caught in Downward Spiral

A sea of red ink was drowning Internet stocks in midday trading Thursday as markets across the board were driven by statistics that show labor costs for U.S. businesses rose faster than expected in the second quarter.

Market watchers expressed concern that the numbers may prompt the Federal Reserve to raise interest rates to stave off inflation.

Just before noon,’s Internet Stock Index was off 17.77, or 3.61 perent, to 474.61, the Nasdaq Composite had tumbled 55.83 to 2,650.01 and the Dow Jones industrial average had dove 164.95 to 10,807.12.

All of the sector’s leaders were down, including Inc. (AMZN) down 2-5/8 to 103-1/8, America Online Inc. (AOL) off 3-1/4 to 99-1/2, CMGI Inc. (CMGI) tumbling 4-1/2 to 93-5/8, Yahoo! Inc. (YHOO) slumping 4-13/16 to 138-3/16 and Inc. (PCLN) off 4-1/4 to 80-3/4.

One of the very few gainers was Juniper Networks (JNPR) up 7/8 to 144-5/8.

Earnings continued to flow through the sector. Juno Online Services (JWEB) was off 13/16 to 20-5/8 despite beating analyst expectations in the latest quarter. Juno lost 56 cents a share, 2 cents ahead of forecasts.

ZDNet (ZDZ) was up 1-3/16 to 19-11/16. The company’s pro-forma earnings were 1 cent a share, better than forecasts that called for a break-even quarter.

Ask Jeeves Inc. (ASKJ) was up 1/16 to 44-1/8. The search engine reported a loss of $9 million, or 42 cents a share, 3 cents ahead of forecasts.

StarMedia Network (STRM) was off 1-5/8 to 41-1/4. The company reported a second-quarter loss of 41 cents a share. That’s 8 cents better than forecasts.

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