Net Stocks Succumb to Selling; Broad Market Drifts

TheStreet.com Internet Sector index is down 6.5%, with what looks like a lot of intraday gaming going on.
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When the bell rings tomorrow, the stock market will close out the year with double-digit gains for the fifth time in a row. In those five years, the

S&P 500

will have gained something like 170% -- or about as well as

TheStreet.com Internet Sector

index will have done this year.

When stocks have a good year there is usually a mass of investors looking to take some of their chips off the table once January comes around. But after a good year, there is also usually a flood of new cash into 401(k)s and the like. This is the dynamic that the market is contending with today.

"It's the traditional tug-of-war," said Gary Kaminsky, managing director of private banking at

SG Cowen

. "There's concern about the amount of profit-taking that's anticipated Monday, but there seems to be a belief that there is going to be a lot of supply."

For today, said Kaminsky, the profit-taking worries are weighing on the market. Nowhere is that more noticeable than in the highflying Internet sector.

The TSC Internet index was lately off 28, or 6.5%, to 407. Among the sector's bellwethers,

Amazon.com

(AMZN) - Get Report

was down 18 1/16, or 5.5%, to 313 3/8.

America Online

(AOL)

was down 14 1/4, or 9.2%, to 140 1/2.

Yahoo!

(YHOO)

was down 22, or 8.2%, to 247 13/16.

"Nothing actually sparked it," said Dan Mathisson, head stock trader at

D.E. Shaw Securities

, of the selling that started midmorning. "It started like any other day and then the bottom dropped out. We're talking crowd behavior, and once the selling starts you get a lot of day traders that are just trying to play in the currents."

Amazon and Yahoo! were trading in lockstep, and Mathisson said there were some who were trying to game that. "A lot of people are playing the intraday spread. If Amazon drops 5 points and Yahoo! just sits there, people are buying the Amazon and shorting the Yahoo!"

Of the action in the Internet stocks, Kaminsky said, "The only recent history we can look at is the biotech rally in '90 and '91. For every one that went up, nine went down into the single digits and many disappeared. There will be some great survivors that are going to dominate the online world."

But he compared the more tertiary issues that have recently jumped unfavorably with Atlantic City.

Movements in the broader market were a lot more staid. The

Dow Jones Industrial Average

was off 5 to 9316 while the S&P 500 was down 3 to 1239. The tech-logged

Nasdaq Composite Index

was down 12 to 2170. The small-cap

Russell 2000

was down a fraction to 410.

After the strong run stocks have had over the last few months, a pullback wouldn't be out of order, said Carl Bhathena, vice president at

Holland Capital Management

in Chicago.

"We may be due for a breather in the near term," he said. "But that is not to say that we're not setting up the stage for January to be relatively healthy. You would expect it to be a strong period for stocks, especially growth-related issues."

On the

New York Stock Exchange

, breadth was on relatively even footing, with advancers leading decliners 1,420 to 1,388 with 337 million shares crossing hands. In

Nasdaq Stock Market

activity, decliners were beating advancers 2,092 to 1,815 on 561 million shares.

The 30-year Treasury bond was up 14/32 to 102 10/32, dropping the yield to 5.10%.

Wednesday's Midday Movers

By

Aaron L. Task
Senior Writer

Genesis Direct

(GEND)

is the

K-tel

(KTEL)

of the day, the "who is this company and can you believe that move?" du jour. The direct merchandiser was up 3 15/16, or 55.8%, to 11 after trading as high as 22 5/8 on news it has signed a deal with

Excite

(XCIT)

to bring 20 Genesis Direct brands to Excite's flagship portal sites. Excite, however, was down 3 5/8, or 7.5%, to 44 7/8, declining along with most other big Internet names.

In the "we have a Web site so you must buy our stock" category,

D.G. Jewellery of Canada

(DGJLF)

was up 1 3/16, or 29.7%, to 5 1/2 on news it plans to market its jewelry online. Separately,

Navigant International

(FLYR)

was up 9/16, or 7.2%, to 8 7/16 after issuing a press release (no, seriously) confirming it has an online site and will soon centralize the Web offerings of its operating companies.

Finally,

Track Data

(TRAC)

was up after announcing -- along with broker/dealer

Track Securities Corp.

-- that it will offer online trading services.

On the clammy side of the Internet mania pillow, some of this week's biggest gainers were down hard this morning, including

SkyMall

(SKYM)

, down 12 1/16, or 29.7%, to 28 3/4;

G-III Apparel

(GIII) - Get Report

was off 3 1/2, or 40.3%, to 5 3/16;

Active Apparel Group

(AAGP)

, down 7 1/16, or 37.1%, to 12; and

Internet America

(GEEK)

, lower by 12 3/8, or 27.4%, to 33.

Additionally, online brokers were down after a big run-up in recent trading and some cautious comments in a Heard on the Street column in

The Wall Street Journal

. Notably lower were

National Discount Brokers

(NDB)

, down 7 1/16, or 22.4%, to 24 7/16, and

E*Trade

(EGRP)

, lower by 10 3/8, or 17.3%, to 49 3/4.

Ascend

(ASND) - Get Report

traded up 5/8 at 66 3/4 on reports that the networker is sealing deals to divest certain extra operations of

Stratus Computer

, which it acquired in October. Earlier in the morning shares climbed as high as 69 5/8.

Next week Ascend is expected to announce plans to unload two Stratus divisions, one through a leveraged buyout and the other through a straight sale, according to analyst Chris Stix with SG Cowen. Stix, who reiterated a strong buy rating on Ascend, expects the company to announce plans to unload a third unit by the end of January. He did not name any buyers for the previously announced deals. Cowen has not banked any deals for Ascend.

Ascend's $822 million stock purchase of Stratus, greeted with skepticism when it was first announced Aug. 3, is now seen as a positive step in Ascend's strategy of helping telephone carriers ease voice traffic onto computer networks. Ascend bought Stratus for its specialized voice-signalling technology, and is discarding operations it doesn't need.

An Ascend official declined to comment on Cowen's report. Stix's colleague Vijay Rajamani was not immediately available for comment.

--

Kevin Petrie

Earnings movers

Finish Line

(FINL)

was up 3/4, or 10.3%, to 8 despite reporting third-quarter earnings of 2 cents a share, matching the 13-analyst forecast but down from the year-ago 14 cents. The company said it expects the adverse retail conditions that hurt its third-quarter results to damage its fourth-quarter performance as well. The estimate calls for fourth-quarter earnings of 18 cents vs. the year-earlier 37 cents.

Zapata

(ZAP)

was up 1 11/16, or 15.7%, to 12 7/16 after reporting fourth-quarter earnings of 4 cents per share, up from 1 cent a year ago as revenues rose 12%. No earnings estimates were available.

In other news:

Adac Laboratories

(ADAC)

, which fell 19% yesterday after saying it will have to restate earnings for 1996, 1997 and 1998, was down a further 1 13/16, or 8.3%, to 20.

Hambrecht & Quist

lowered its recommendation to hold from buy.

Advanced Micro Devices

(AMD) - Get Report

was up 1 13/16, or 6.6%, to 29 5/16 after

Prudential Securities

made some positive comments about the chip maker's shipments this quarter. Other chip names were higher in concert, including

Texas Instruments

(TXN) - Get Report

, lately up 3 1/8 to 87 1/8 and

National Semiconductor

(NSM)

, up 5/8 to 13 7/16.

CalComp Technology

(CLCP)

was down 23/32, or 65.7%, to 3/8 after saying last night it will have to weigh strategic alternatives, including the sale of some or all assets and a shutdown of operations, because majority shareholder

Lockheed Martin

(LMT) - Get Report

will not increase its existing credit capacity. Lockheed Martin was up 3/16 to 83 13/16.

CarioThoracic Systems

(CTSI)

was up 1, or 21.6%, to 5 5/8 following an upgrade to buy from neutral at

Piper Jaffray

.

Cox Radio

(CXR)

was down 2 1/2, or 5.7%, to 41 1/2 after being downgraded to hold from outperform at

Wheat First Union

.

Dal-Tile International

(DTL)

was higher by 13/16, or 8.4%, to 10 7/16 after being upgraded to buy from outperform by

Salomon Smith Barney

.

Electronic Data Systems

(EDS)

was up 7/8 to 49 15/16 thanks to an upgrade from

Merrill Lynch

to near-term accumulate from neutral.

Hartmarx

(HMX)

was up 11/16, or 15.3%, to 5 3/16 after saying it will buy back up to 1.5 million shares.

HS Resources

(HSE)

was higher by 1/2, or 7.3%, to 7 5/16 after announcing a buyback of up to $5 million of its shares.

Medford Bancorp

(MDBK)

was up 3/16 to 17 after setting a buyback of up to 5% of its common shares.

Microware Systems

(MWAR)

was up 1 15/16, or 106.9%, to 3 13/16 after signing a deal with

IBM Japan

which will use the company's real-time operating system in its new digital television set-top box.

IBM

(IBM) - Get Report

was down 1/16 to 187 1/16.