Tech Stocks Slump, Prompting Fear of Wider Profit-Taking

Internet stocks led Wall Street sharply lower Tuesday, triggering fresh worry that the recent technology-stock surge may have reached a near-term top.

Rising bond yields helped spark selling across the board on Wall Street, but the highflying tech sector suffered the deepest pullback.

The Nasdaq composite index slumped 86.51 points, or 2.4%, to 3,571.66, its biggest setback since it dropped 108.33 points Sept. 23.

The Interactive Week index of 50 Net-related stocks dived 3.6%.

The Dow Jones industrials eased just 32.42 points to 11,160.17, but losers swamped winners by about 2 to 1 on the New York Stock Exchange and on Nasdaq.

Many analysts have been reluctant to try to call a top in the red-hot tech sector, as the Nasdaq index has set record after record since mid-October. Its year-to-date gain now stands at 62.9%.

With less than three weeks to go in the year--and with year 2000 computer bug worries still out there, albeit subdued--many traders are more worried that any profit-taking in Nasdaq issues could quickly snowball.

Today’s action will be key, traders say, because Nasdaq hasn’t suffered two consecutive sessions of heavy selling since early October.

Losses in major Nasdaq stocks were accelerating Tuesday as the regular trading session closed, a sign that few bargain hunters were stepping up.

But after the close of regular trading, tech bellwether Oracle announced stronger-than-expected quarterly earnings. Its shares fell $2.88 to $76.94 in regular trading, then jumped to $84.56 in after-hours trading.

One tech sub-sector is already in a sharp pullback: semiconductor stocks. The SOX index of 16 major chip stocks slid 6.8% on Tuesday and is down 13.8% from its record high Dec. 6.

The stocks have weakened on concerns that computer companies and other chip users may have stockpiled supplies in recent months because of Y2K worries--and that orders may drop off in coming months.

Chip losers on Tuesday included Xilinx, down $8.06 to $78.94; Texas Instruments, down $9.52 to $96.56; and Vitesse Semiconductor, down $4.88 to $45.38.

The market overall was hurt Tuesday as bond yields rose sharply. Some traders dumped bonds after the government reported that retail sales rose a stronger-than-expected 0.9% last month--which could put more pressure on the Federal Reserve to raise interest rates again to slow the economy.

The bellwether 30-year Treasury bond yield ended at 6.30%, up from 6.20% on Monday and the highest since Dec. 2.

But some stocks got a lift from the bullish economic news--including some traditional retailers that have mostly taken a back seat to Internet retailers on Wall Street in recent months.

Dayton Hudson jumped $2.75 to $71.25, Kmart gained 75 cents to $12.25 and Nordstrom added 25 cents to $24.63.

Among Tuesday’s highlights:

* Net stocks down sharply included Yahoo, off $17.94 to $333.13; Amazon.com, down $6.88 to $95.63; and America Online, down $5.19 to $88.81.

* Among other tech and telecom losers, Apple Computer fell $4.13 to $94.88, Cisco Systems lost $3.25 to $97.94, JDS Uniphase slid $14.19 to $219.88 and Intel dropped $1.63 to $72.44. But 3Com surged $5.81 to $50.63 after detailing plans to sell shares in its Palm Pilot unit.

* Financial stocks slid as yields rose. J.P. Morgan tumbled $3.31 to $131.25 and E-Trade fell $3 to $31.38.

* Entertainment issues were a pocket of strength, led by Time Warner, up $1.50 to $66.50, and Seagram, up $1.19 to $45.50.

Market Roundup, C11

* STELLAR RESULTS

Oracle’s earnings soared 40%, beating optimistic forecasts. C3

* ROBUST DEMAND

Retail sales rose 0.9% in November, signaling a strong buying season. C3

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Needing a Net? Internet-related stocks pulled back on Tuesday, but the Interactive Week index of 50 Net stocks still is up 61% since Sept. 30. Monthly closes and latest: Tuesday: 521.30

Source: Bloomberg News