Just last week, the Dow Jones Industrial Average was flirting with the mythical 10,000 mark. That seemed like ancient history Tuesday as the Dow and the rest of the market got hammered in the worst sell-off in weeks.
The reason? Take your pick -- earnings concerns, interest rates, soggy tech shares, rising energy costs, war in Kosovo, trouble at Coke. Frightened investors were unloading stock positions almost as fast as they could turn the pages of their portfolios.
It's way too soon to say that Wall Street's bull run at last has petered out. But traders are clearly coming up short in finding decent reasons to drive stocks ever higher, and it looks like they can kiss off any chance of blue-chip stocks soaring back into five digits, at least for a while.
The Dow tumbled 218.68 points to close at 9671.83, and the Wired Index was 20.92 lower at 599.76. The Nasdaq Composite Index fell 73.09 to 2322.85, and the S&P 500 was down 34.87 at 1262.14.
It wasn't any one thing. Rather, the selling spree, which worsened as the afternoon wore on, seemed to result from the cumulative weight of a variety of factors.
"I don't see anything out there that seems too significant," said Steve Adams, managing director of Van Kasper & Co. "You've got a handful of stocks that are overvalued, and the great mass of stocks that are fairly valued."
Along with worries that some of those overvalued companies will be reporting less-than-stellar quarterly results, the market was jolted by news that the Organization of Petroleum Exporting Countries will cut production by about 2 million barrels a day and maintain lower output for at least a year. This, of course, will drive fuel costs higher, which in turn will take a toll on manufacturers, shippers, airlines, and other such heavy drinkers.
The Dow's big loss was attributable in part to Coca-Cola (KO) shedding US$1.75 to $65.94 after Merrill Lynch lowered its first-quarter earnings estimate for the sugar-water giant by a penny to 31 cents a share. Morgan Stanley Dean Witter expressed caution as well about Coke's prospects.
Yahoo (YHOO) also took it on the chin, dropping $9.50 to $155.50 as The Wall Street Journal confirmed speculation that the company is negotiating acquisition of Broadcast.com. Citing "people familiar with the matter," the Journal said Yahoo is willing to pay as much as $120 a share for the online broadcaster, which saw its stock surge 37 percent Monday as rumors of a pending deal swirled through trading floors. Broadcast.com (BCST) slipped $4.50 to $112 as the rumor switched to seeming fact.
Is that all for Yahoo? Maybe not. Interactive Week is saying that the portal papa also may have its sights set on online auctioneer eBay (EBAY). However, eBay's nearly $18 billion market valuation could make it too rich for Yahoo's blood. The auction leader was $8.75 lower at $146.38.
Meanwhile, CNET (CNET) gained $1.25 to $94.50 as it tossed yet another company into its shopping basket. The Web-site operator will shell out more than $46 million for KillerApp, which provides comparison-shopping services for computers and consumer electronics. Looks like a pretty good fit for CNET's other offerings.
And here's Autoweb.com (AWEB), an online car dealer, motoring 186 percent higher to $40 in its first day of trading. The company debuted with 5 million shares initially priced at $14 apiece. Along with a dot com in its name, Autoweb posted a loss of $11.5 million last year, making it a certifiably golden Internet play.
Marketing firm Leap Group (LEAP) also made an impressive advance, rising 69 percent to $3.59 on word that its Quantum Leap Communications unit will put together a print and new-media campaign for Microsoft's Slate. Now that Slate isn't charging an entrance fee, looks like they quickly figured they'd have to boost traffic if they want to soak advertisers.
One final dispatch from the Net: America Online (AOL) fell $8.69 to $121.31 after Jim Benning, a trader at BT Brokerage, made the not-very-insightful observation that Internet stock valuations "are through the roof," and that AOL in particular "is trading at 519 times earnings." Nice call, Jim.
Tech shares were especially bruised as investors fled the sector amid fears that personal-computer sales are facing a prolonged slump. Dell Computer (DELL) declined $2.19 to $35.69, and International Business Machines (IBM) was down $1 at $166.
Van Kasper's Adams isn't so sure. His hunch is that more businesses will realize that it's safer to go out and buy all new gear than deal (or not deal) with upgrading existing systems to skirt Y2K problems. As such, he suspects PC sales may surprise people in the second half.
As a buying opportunity, Adams said PC stocks "are starting to get interesting." Internet shares, on the other hand, continue to thrive in an evil parallel universe where the normal rules don't apply.
"It's always amusing when analysts try to come up with reasons for justifying those high valuations," Adams noted. "That's when you want to run the other way."
Speaking of duck and cover, computer retailer Micron Electronics (MUEI) slid 38 cents to $11.44 after hitting estimates with quarterly profit of 7 cents a share. But investors didn't like the company's 7 percent setback in revenue, and opted to play it safe by fleeing Micron's stock.
Petco Animal Supplies (PETC), meantime, jumped 25 percent to $8.13 as it reported record income of 37 cents a share, topping the expected 34 cents. CEO Brian Devine said he's "comfortable with current analyst expectations for fiscal 1999." Woof.
Lastly, Lycos (LCOS) declined $4.81 to $86.50 and USA Networks (USAI) was $1.75 lower at $37.13 after the two companies said they'd cross-promote a new USA show called Happy Hour. Lycos and USA, as we all know, are struggling mightily to tie the knot despite fierce shareholder opposition, and this is among the first examples of the sort of synergy they hope the merger will produce.
As for Happy Hour, perhaps The New York Times put it best: "It features games and sing-along competitions among guest stars like Christopher Darden, a prosecutor of OJ Simpson, warbling 'Louie, Louie' and guessing whether a close-up picture is of a rock star or a rodent." Lycos is now in the process of acquiring Wired News' parent.
