Net Stocks Slip, Blue Chips Fall Sharply

Internet stocks slipped on Friday, but avoided the sharp losses that hit blue chips. The Nasdaq rose on strength in semiconductor issues.

The ISDEX fell 1 to 728, while the Nasdaq rose 14 to 3860. The Dow plummeted 265 points to 10,449 on continued weakness in financial shares and the S&P 500 fell 14. Volume rose on a triple-witching Friday, with 1.2 billion shares changing hands on the NYSE and 1.48 billion on the Nasdaq. Decliners led advancers 15 to 13 on the NYSE, 21 to 17 on the Nasdaq and 3 to 2 on the ISDEX. Housing starts fell 3.9% in May, the lowest number in a year.

Exodus Communications was the standout on the ISDEX, soaring 10 1/8 to 103 1/4. The company will split its shares 2-for-1 after the close on Tuesday.

Shares of eBay fell 3 3/16 to 60 7/8 after Merrill Lynch analyst Henry Blodget said he doesn’t expect much upside on either earnings or revenue when the firm reports next month. The company usually beats expectations handily. Shares of Yahoo! rose 1 1/4 to 140 15/16 after initially falling more than $3.

Shares of Red Hat gained 1 5/8 to 25 after reporting a first quarter loss of 2 cents a share, 2 cents better than analysts expected.

Covad Communications fell 6 13/16 to 18 7/16 after predicting lower DSL installation rates. The company also announced the acquisition of privately-held BlueStar Communications for 8 million shares. Rhythms NetConnections fell 3 1/8 to 15 3/8 and NorthPoint Communications fell 2 1/8 to 12 1/8.

Shares of E*Trade rose 1/2 to 17 5/8 after Donaldson, Lufkin & Jenrette reiterated its Top Pick and $31 price target.

Digital Island fell 1/4 to 32 5/16, down from a high of 35 5/8, after Chase H&Q added the stock to its Focus List.

Shares of Open Market recovered 7/16 to 16 3/16 a day after three class action lawsuit were filed against the company alleging false and misleading statements.

Shares of S1 Corp. continued to be on the defensive, down 2 7/8 to 28 1/16.

PSINet declined 2 1/16 to 28 1/16 after announcing it had completed the acquisition of Metamor Worldwide .

DualStar Technologies (DSTR) rose 19/32 to 4 29/32 after trading as high as 5 7/16. The company, which offers high-speed Internet access and cable television, announced an $55 million investment from a unit of Peco Energy .

Internet infrastructure firms continued to receive positive comments. Prudential began coverage on several issues with Strong Buy ratings: Cisco , up 1 5/16 to 67 13/16, Juniper Networks , down 2 17/32 to 113 after a 2-for-1 split took effect, Foundry Networks , up 2 1/16 to 108 1/2, Alteon WebSystems , up 3/4 to 76 3/4, and Extreme Networks , down 1 11/16 to 84 3/4. Digital Lightwave fell 4 1/2 to 85 1/16 after initially rising on a CE Unterberg Towbin Buy rating.

Recent IPO Sonus Networks gained 7 1/2 to 99. The firm’s post-IPO quiet period ends Monday.

CyberCare soared 3 7/8 to 9 after the company received FDA approval to market its Electronic HouseCall system, an Internet-based technology that remotely monitors individuals in their homes for health care purposes.

Shares of GoTo.com rose 1 15/16 to 19 a day after signing a deal to be a premier search partner on CNET . GoTo.com was also the subject of positive comments on CNBC.

Some technical comments on the market: As I said at noontime, I’m beginning to have my doubts that the market can

surmount our key resistance levels. The Nasdaq and S&P 500 are showing some resilience, but the Dow fell through important support at 10,500 and ended pretty much at the lower boundary of its bearish “diamond” pattern. Our next support on the industrials is 10,250, the baseline of our bearish descending triangle. Not a pretty picture. If we go below 10,200, we will discuss how low we can go on this index. We are still closer to our upside boundaries than our downside ones on the Nasdaq and S&P 500; that’s a plus. Again, watch for breaks of our trading range for the first sign of the market’s direction: 3700 and 3900 on the Nasdaq, and 1480 to the upside on the S&P 500. The downside caution level on the S&P 500 is in the 1370-1410 range. The consolidation just beneath important levels is a positive, as are bullish cup-and-handle formations on the Nasdaq and SPX. But our bearish moving average crossover on the Nasdaq occurred yesterday, and the 50-day moving average is now below the 200-day moving average for the first time since October 1998. However, in this bull market, that usually has been a contrary indicator, often coming after the worst is over. Have a good weekend.

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