Traders Take Profits as Net Stocks Take a Rest

Despite the selloff, market participants aren't panicking yet. Also, sources are reporting talks between Microsoft and the government.
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What's going on with the

Nasdaq

? It just doesn't seem like anything specific needs to account for today's losses in high tech. Isn't a 60%-plus gain for the year enough? Isn't it about time the sector took a breather and traders took some profits off the table?

If the market really cared about this morning's strong

retail sales

report and subsequent weakness in bonds, then the

Dow

wouldn't be up about 30 points. But few were

panicking or saying that today's selloff was the start of something bigger.

This afternoon, several sources are reporting that serious discussions are ongoing between officials at Microsoft

(MSFT) - Get Report

and the federal government in an attempt to settle the government's antitrust suit against the tech giant.

As a result, Microsoft shares are up 3 1/4, or 3.4%, to 100 in heavy volume of over 48 million shares. The stock's upswing has also helped move the Dow higher, responsible for 16 points of the Dow's current 30-point increase.

Among the biggest losers were those that have climbed the most over the past few months.

Yahoo!

(YHOO)

was down 11 5/16, only 3%, at 339 3/4.

Red Hat

(RHAT)

, which went from 124 1/2 on Nov. 22 to a high of 302 Dec. 8, was down 20, or 8%, at 226 1/2.

There's a little more to be concerned about in the e-finance sector.

TheStreet.com E-Finance

index was off 3 15/32, or 4%, at 83 1/16 in recent trading. The sector was likely feeling the sting from the weakness in Treasuries.

E*Trade

(EGRP)

was off 2 1/4, or 6.6%, at 32 1/8. The Heard on the Street column in today's

Wall Street Journal

indicated that E*Trade's purchase of

Telebanc Financial

(TBFC)

is proceeding and the deal could be closed early next year, pending regulatory approval.

But the sector's bright spot could be found in Web hosting companies.

Digital Island

(ISLD)

was up 12 7/8, or 10%, at 143 on a couple of deals.

Digital Island said it was teaming up with

Rhythms NetConnections

(RTHM)

to give Digital Island high-speed DSL delivery into major U.S. cities via Rhythms' broadband access solutions, while allowing Rhythms to offer Digital Island 3-Business Delivery Services to its customers. Rhythms NetConnections gained 27/32, or 2.3%, to 36 7/8 on the news.

And

Sandpiper Networks

, which is merging with Digital Island, said it had expanded its agreement with

America Online

(AOL)

for placing Sandpiper servers on the AOL Network.

Also

Exodus Communications

(EXDS)

was up 4 1/16, or 2.4%, at 171 3/4 after

Salomon Smith Barney

upgraded the stock to buy from outperform.

Digex

(DIGX)

was up 6 1/4, or 13%, at 53 7/8, while

Globix

(GBIX)

was up 16 3/4, or 25%, at 84, perhaps in sympathy with other Web hosters.