Nasdaq Takes Big Fall as Tech Stocks Plunge

The losses in the tech-heavy index infected the rest of the major indices, sending them lower also.
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Internet stocks were crushed as the tech-chunky

Nasdaq Composite Index

hemorrhaged 3.9%, suffering its third-largest point drop in its history.

TheStreet.com Internet Sector

tumbled 48.59, or 9.6%, to 456.26.

TheStreet.com E-Commerce Index

swooned 8.70, or 8.6%, to 93.10.

Shortly before 3 p.m. EST, a fresh wave of selling seized the market and sent the major market indices to their session lows. The major gauges closed just off their session lows.

The Nasdaq Comp dropped 94.06 to 2310.86.

News that

USA Networks

(USAI) - Get Report

was buying

Lycos

(LCOS)

and merging it with USA Networks' e-commerce and Internet assets sent investors and traders fawning over shares of USA Networks and shunning shares of Lycos. USA Networks surged 3 5/8, or 9.6%, to 41 5/8, while Lycos crumbled 33 3/16, or 26.1%, to 94.

TheStreet.com

wrote about the deal and reaction to it in

stories

this

afternoon.

The

Dow Jones Industrial Average

surrendered 158.08, or 1.7%, to 9133.03. The

S&P 500

fell 27.63, or 2.2%, to 1216.14. The small-cap

Russell 2000

slumped 8.20, or 2%, to 403.13.

Valuation concerns, the possibility of higher interest rates later on in the year and profit-taking were among some of the reasons cited for the selloff.

The 30-year Treasury bond advanced. The long bond was up 13/32 to 99 1/32, yielding 5.32%.

On the

New York Stock Exchange

, decliners beat advancers 1,794 to 1,101 on 714 million shares. On the

Nasdaq Stock Market

losers beat winners 2,820 to 1,216 on 905 million shares.

On the NYSE, 84 issues set new 52-week lows while 15 touched new highs. On the Nasdaq, 73 issues set new lows while new highs totaled 36.

On the Big Board,

America Online

(AOL)

was most active, with 17.5 million shares changing hands. It was down 11 1/16, or 6.8%, to 147 15/16.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 26.4 million shares changing hands. It was down 6 1/4, or 6% to 97 13/16.

Market data above are preliminary. Updated numbers and analysis will follow in the Market Roundup

.

2:54 p.m.: Internet Sector Keeps Getting Slammed

The major market averages were markedly lower going into the final hour of trading with Net stocks leading the way down, suffering huge losses.

TheStreet.com Internet Sector

index was down 32 to 473.

TheStreet.com E-Commerce Index

was down 6 to 96.

News that

USA Networks

(USAI) - Get Report

was acquiring

Lycos

(LCOS)

and merging it with USA Networks' e-commerce and Internet assets met mixed results from investors. Lycos' stock went into freefall while USA Networks jumped. Lycos was down 28, or 22%, to 99 7/16, while USA Networks has added 5 3/8, or 14%, to 43 5/16.

TheStreet.com

wrote about the deal and reaction to it in

stories

this

afternoon .

The

Dow Jones Industrial Average

was down 55 to 9236.

The

S&P 500

was up 11 to 1233. The

Nasdaq Composite Index

was down 44 to 2361. The small-cap

Russell 2000

was down 6 to 406.

The 30-year Treasury bond was up 14/32 to 99 2/32, yielding 5.31%, but off its best levels of the day.

Valuation concerns, the possibility of higher interest rates later on this year and profit-taking have all been cited for the tech arena's swoon.

On the

New York Stock Exchange

, decliners were beating advancers 1,794 to 1,101 on 549 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,640 to 1,146 on 609 million shares.

On the NYSE, 71 issues had set new 52-week lows while 12 had touched new highs. On the Nasdaq, 53 issues had set new lows while new highs totaled 29.

On the Big Board,

America Online

(AOL)

was most active, with 14 million shares changing hands. It was down 6 7/16 to 152 9/16.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 20 million shares changing hands. It was down 2 9/16 to 101 1/2.

Since last Thursday, it has been a bumpy path for tech stocks.

2:00 p.m.: Stocks Near Their Session Lows

Internet stocks were getting pummeled, as the major market averages recently skidded to the neighborhood of their intraday lows.

TheStreet.com Internet Sector

index was down 35 to 470.

TheStreet.com E-Commerce Index

was down 7 to 95.

The

Nasdaq Composite Index

was down 56 to 2349. The

Dow Jones Industrial Average

was down 85 to 9206. The

S&P 500

was down 17 to 1227. The

Russell 2000

was down 6 to 405.

Turning to Treasuries, the 30-year bond was up 8/32 to 98 29/32, yielding 5.33%.

News that

USA Networks

(USAI) - Get Report

was acquiring

Lycos

(LCOS)

and merging it with USA Networks' e-commerce and Internet assets met with disdain for Lycos' stock and a warm greeting for USA Networks. Lycos was down 26 1/8, or 20%, to 101 1/2, while USA Networks has added 4 3/8, or 12%, to 42 1/4.

Elsewhere on the e-commerce front,

Nike

(NKE) - Get Report

said it has begun selling some of its footwear and apparel online. The news sent the stock up off the bottom and into positive territory. It was lately up 3/4 to 51 3/4. It had traded as low as 49 11/16. On

Feb. 1,

TheStreet.com

profiled the company and reported it would unveil its e-commerce effort within the next 10 days.

On the

New York Stock Exchange

, decliners were beating advancers 1,853 to 993 on 464 million shares. On the

Nasdaq Stock Market

losers were beating winners 2,640 to 1,146 on 609 million shares.

On the NYSE, 65 issues had set new 52-week lows while 9 had touched new highs. On the Nasdaq, 53 issues had set new lows while new highs totaled 29.

On the Big Board,

America Online

(CPQ)

was most active, with 13 million shares changing hands. It was down 8 3/4 to 150 9/16.

On the Nasdaq,

Dell

(DELL) - Get Report

was most active, with 18 million shares changing hands. It was down 2 9/16 to 101 7/16.

Focus: Off The Top

In light of the market's latest rough patch which began in earnest last Thursday, and in the wake of near-term trouble for the market going forward, just think, it wasn't too long ago that some of the market's major indices were closing at all-time highs.

For example, as recently as Feb. 1, the Nasdaq Comp enjoyed its all-time closing high when it ended at 2510.09. As of approximately 1:30 p.m. EST, it had fallen about 6.6%.

As for the S&P 500, its record closing peak was set on Jan. 29 when it closed at 1279.64. It had tumbled about 4.4% as of 1:30 p.m. EST.

On Jan. 8, the Dow closed at an all-time high of 9643.32. As of 1:30 p.m., EST, the Dow had fallen roughly 4.8%.

12:51: Midday Musings: Factors Converge to Slam Stocks Lower

11:58 a.m.: Tech Stocks Continue to Falter

Today was the day that the

Goldman Sachs

technology conference was supposed to save the market.

Michael Dell

would step up to the dais at 10 a.m. or so, waft some incense toward the parishioners, and tech stocks would fly.

So while everyone is talking about how the terms of

USA Networks

(USAI) - Get Report

takeout of

Lycos

(LCOS)

, with its meager premium, is taking tech stocks lower, let's not forget what's not taking them up: the 100% surefire, never fails

Goldman Sachs' 13th Annual Technology Investment Symposium

.

There is always heady anticipation for the annual fete. With good reason -- tech stocks generally move higher while the confab is going on. Those gains may yet come. But anyone who bought stock ahead of the conference with a mind toward instant gratification has not gotten it. The Lycos news disappointed the market, but it is just as disappointing that its shining knight did not ride to the rescue. Hence the selling.

The

Dow Jones Industrial Average

was lately down 92 to 9199. The broader

S&P 500

was down 17 to 1227. The tech-heavy

Nasdaq Composite

index was off 58 to 2347, while

TheStreet.com Internet Sector Index

was down 41 to 463. The small cap

Russell 2000

was down 6 to 405.

Still, Wall Streeters, accustomed to the sea-sawing market took a sanguine view of the selling.

"We're just in this corrective phase," said Bryan Piskorowski, market analyst at

Prudential Securities

. "At Pru we stand bullish in the long term and sketchy in the near term. This is nothing new, this is healthy. What goes up must pause before it goes up again."

10:56 a.m.: Lycos Deal Sends Stocks Lower

It's a rare day when a takeover announcement is the thing that lays the market low. But the news that

USA Networks

(USAI) - Get Report

would take out

Lycos

(LCOS)

has done exactly that.

The problem with the Lycos deal is a strange one. In usual terms, the deal is not such a bad one -- Lycos shareholders will receive about a 2% premium on Lycos' Monday closing price. But Lycos is an Internet company, so the usual terms do not apply. There is incredible risk inherent in Internet stock valuations, and the only reason investors were willing to take on that risk is the possibility that these stocks could go higher still.

"The reason people are able to stomach the tremendous risk in these is they might double in the next month," said Dan Mathisson, head stock trader at

D.E. Shaw Securities

. "You take away the upside and there's no reason to be in them."

And so the Lycos deal set off a domino chain.

"Lycos went down and that brought down

Yahoo!

(YHOO)

and

Amazon

(AMZN) - Get Report

and

AOL

(AMZN) - Get Report

, and then the stocks that were up yesterday came down," said Mathisson. "We're seeing the whole thing get hit."

The

Dow Jones Industrial Average

was lately down 73 to 9218. The broader

S&P 500

was down 15 to 1229. The tech-heavy

Nasdaq Composite

index was off 48 to 2357, while

TheStreet.com Internet Sector Index

was down 26 to 479. The small cap

Russell 2000

was down 4 to 408.

9:58 a.m.: Stocks Fall Slightly at Open

Stocks were slightly softer after

Monday's mixed session.

USA Networks

(USAI) - Get Report

agreed to buy

Lycos

(LCOS)

. Lycos will be merged with USA Networks' e-commerce and Internet assets.

The

Dow Jones Industrial Average

was down 24 to 9267. The

S&P 500

was down 3 to 1241. The

Nasdaq Composite Index

was down 3 to 2402. The

Russell 2000

was down 1 to 2402.

TheStreet.com Internet Sector

was down 14 to 491. Meanwhile,

TheStreet.com E-Commerce Index

was down 4 to 98.

The 30-year Treasury bond was up 17/32 to 99 5/32, yielding 5.31%.

Most Up at Open -- NYSE

Hewlett Packard (HWP) , up 3 to 74 7/8

:

Most Up at Open -- Nasdaq

USA Networks (USAI) - Get Report, up 6 11/16 to 44 5/8

.

Most Down at Open -- NYSE

DaimlerChrysler (DCX) , down 3 1/8 to 95 3/8

:

Most Down at Open -- Nasdaq

Lycos (LCOS) , down 13 1/2 to 113 3/4

.