While Blue-Chip Techs Are Weaker, Most B2B Stocks Catch Fire

You couldn't expect the market to keep up the torrid pace it set at the end of last week. And a slow news day was keeping the market under wraps midday.

The Nasdaq was down 15.74, or 0.4%, at 3797.64 in recent trading, moving in a range between 3765.60 and 3875.66. TheStreet.com Internet Sector index, or the DOT, was down 22.90, or 2.4%, at 922.52. However, there is significant upward movement of most B2B stocks.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 22.90 -2.4% 922.52 TSC E-Commerce 0.83 +1.5% 56.54 TSC E-Finance 2 13/32 +4.7% 53 11/32 Nasdaq 15.74 -0.4% 3797.64

Barry Hyman, senior market analyst with Ehrenkrantz King Nussbaum, summed up the performance of the market quite simply. He said that the soft economic data last week merely took away the bearish case, but he would still need to see more evidence that the economy is slowing in order to get him to think the Nasdaq will bust through the upper end of its range, which he places anywhere from 4000 to 4150. As a result, Hyman said he would not chase the market, particularly those stocks that went up 30% to 50% last week. Rather, he would be buying tech on any pullbacks.

In order to push through those levels, Hyman said the market would need to hear some rhetoric from Fed officials that they feel the tightenings the Fed has done were having the desired effect, and see additional data that confirms just that. The first test for the market will be Friday, when the Producer Price Index for May will be reported. If the data do not jive with the market's new view of a slowdown, he said that it would remain stuck in a range, but not fall below last month's lows. Hyman said the market was already anticipating a 25 basis-point hike at this month's Fed meeting so its impact would be minimal.

Hyman said today's price action was interesting in that while many of the blue-chip tech names were weaker, money was starting to come into the more speculative end of the Nasdaq, namely business-to-business stocks. And while he was buying Merrill Lynch's B2B HOLDRs (BHH Quote) back in mid-April, he said he would be focusing more on individual stocks that have a better chance at outperforming the rest of the group like Ariba (ARBA Quote), Commerce One (CMRC Quote) and Internet Capital Group (ICGE Quote).

In recent trading, Ariba was up 7 3/4, or 11%, at 78 1/4; Commerce One was up 4 1/8, or 8%, at 54 7/16; and ICGE was up 5 1/16, or 14%, at 41 5/8. Among other B2B names, E.piphany (EPNY Quote) was up 10 1/4, or 10.8%, at 105; and Foundry Networks (FDRY Quote) was up 8, or 9.8%, at 90.

FreeMarkets (FMKT Quote) was up 2, or 3.9%, at 53 1/2. In a midday note today, Credit Suisse First Boston detailed lockup release for shares of FreeMarkets. According to the note, approximately 26 million shares of FreeMarkets will be released June 6 from their 180-day lockup. Approximately 17 million will be freely tradable on June 7, they wrote, while the remaining 9 million are held by insiders who are restricted from sale until after reporting the June quarter. Analysts note that the 10-day average daily trading volume was 324,000 and the current float was 6 million shares. Check out James Cramer's take on lockup releases in a piece filed earlier today.

Credit Suisse First Boston, which has not done underwriting for FreeMarkets, indicated that the business momentum at FreeMarkets remains strong and expects it to announce serveral new e-commerce products that should "enhance its value proposition to customers as well as increasing the company's ability to rapidly scale." CS First Boston has a buy rating on FreeMarkets.