Wall Street was holding up a finger to test the wind Wednesday, but was having trouble figuring which way the breeze was blowing.
Stocks were trading in a fairly narrow range, flitting in and out of positive territory. Tech shares, which were buffeted early on by a profit warning from 3Com, appeared to be gaining on continued enthusiasm for Hewlett-Packard's restructuring move.
The broader market was patiently waiting for Fed chief Alan Greenspan to finish speaking about Social Security in an appearance on Capitol Hill.
The Dow Jones Industrial Average fell 29.61 points to 9268.00 in mid-afternoon trading, and the Wired Index was 10.88 lower at 571.60. The Nasdaq Composite Index shed 9.01 to 2250.02, and the S&P 500 was down 2.23 at 1223.27.
Networking big boy 3Com (COMS) tumbled 13 percent to US$23.63 after saying its fiscal third-quarter earnings will come up short of estimates, probably in the 23 cents-a-share range. Analysts had been looking for considerably better performance, more like 36 cents. 3Com blamed the shortfall on a slump in its sales to deep-pocketed business clients.
While the cyclical nature of enterprise technology sales comes as no surprise, what's most telling here is how badly 3Com's stock was punished for the company merely stating the obvious -- that corporate customers are holding back on big-ticket purchases for a variety of reasons, including global economic uncertainty and the Y2K reckoning. Share prices are so high, there's simply no margin for error.
"Any small disappointment will knock the crap out of a stock," said Allan Roness, research director for JW Genesis Capital Markets. "We're at a very lofty level now."
The market's altitude also requires a constant focus on innovation and reinvention to justify sky-high valuations. Dell Computer (DELL) advanced 38 cents to $78.44 as it took the wraps off a new online superstore, Gigabuys.com, which will complement its traditional PC lineup with a wide assortment of accessories and software.
Clearly this is the wave of the future. After achieving critical mass in a particular niche, online retailers are rapidly expanding to cut into the action of other niche players. Hence we see Amazon.com going from books to CDs to movies, and then to an assortment of other goodies. We see Yahoo running one of the biggest cyber malls on the Web. And now Dell is looking to become the Net's one-stop shop for computer gear.
It's a savvy move, as rival Cyberian Outpost (COOL) can attest. Cyberian surged 36 percent to $21.94 after saying it expects fourth-quarter revenue from online hardware sales to quadruple to $33 million. Of course, Cyberian is still losing money and didn't bother saying when break-even is expected, but, hey, what do you want for a Net stock?
And with enthusiasm for all things dot com showing no sign of waning, it comes as little surprise that online broadcaster NetRadio has filed to raise nearly $35 million by going public. NetRadio's majority shareholder, music and software distributor Navarre (NAVR), gained $1.19 to $16.
Look who's coming to dinner: It's PaineWebber (PWJ), announcing the $13.5 million purchase of a 25 percent stake in Kingland, which develops online trading services for financial firms. PaineWebber's better-late-than-never embrace of the Net follows a similar move by Merrill Lynch, which recently shelled out nearly $30 million for the online-trading resources of investment firm DE Shaw.
Investors gave a wary reception to PaineWebber's coming of age, pushing the broker's stock down 81 cents to $36.19. The looming arrival of such a prominent player also produced a mixed reaction among established online brokers. ETrade Group (EGRP) fell 94 cents to $46.75, while Ameritrade (AMTD) rose 13 cents to $46.75 by saying it will fight back with an expansion of its operations.
Charles Schwab (SCH) was 6 cents higher at $73.75.
