Strong Palm Can't Hold Nasdaq Up

Despite the continued run of the day's hot IPO, tech stocks are enduring a broad selloff. The Dow was clinging to positive territory.
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Maybe it'll be the next Bond movie: The Palm Is Not Enough.

Despite the continued strong performance of the

Palm

(PALM)

IPO, the market has hit a rough patch this afternoon. Tech was seeing the most serious bloodletting, with Palm parent

3Com

(COMS)

taking a particular drubbing.

Palm lately was up 68, or 178%, to 106, giving it a market capitalization of $59.5 billion. The handheld computer maker's 23 million-share IPO was priced late yesterday at $38 a share, above the expected range of $30 to $32.

Brian Gilmartin, portfolio manager for

Trinity Asset Management

, noted that Palm's move owed a lot to the very limited float. The company has a total of 562.2 million shares outstanding, and 3Com holds 94.8% of them. "The smaller the float," he said, "the tighter the squeeze on the price."

3Com was off 16 1/8, or 15.4%, to 88 -- giving it a market cap of just $30.1 billion -- as investors leapt out of the shares after Palm started trading. 3Com plans to spin the rest of Palm off to shareholders within the next two quarters. A 3Com spokeswoman said the exchange ratio and exact record date haven't been determined yet, but shareholders who bought earlier today would be eligible.

The hype surrounding the much-anticipated IPO kept all eyes on the

Nasdaq Composite Index

, which continued to be lifted higher by small- and mid-cap communications and biotech stocks. "If you can combine wireless data, mobility and Internet connectivity, you have yourself a nosebleed valuation."

Lately, the Nasdaq was down 42, or 0.9%, to 4742, after pushing past the 4700 mark yesterday on record volume of 2.2 billion shares.

In Nasdaq trading,

Radiant

(RADS)

shares were flying after it said it inked an e-commerce deal with

Microsoft

(MSFT) - Get Report

and positive comments from

Credit Suisse First Boston

gave

HNC Software

(HNCS)

a bounce.

Sharing in the Nasdaq's decline,

TheStreet.com Internet Index

was falling 35, or 2.9%, to 1165, with

BroadVision

(BVSN) - Get Report

and

Lycos

(LCOS)

stumbling.

The usually hot

Nasdaq Biotechnology Index

was looking cool, off 2.1%.

Despite today's losses, savvy investors can't dispute the strong performance in the stocks that have worked and feel compelled to get on board. "I feel as if I have to," said Gilmartin, whose portfolio is heavily weighted in large-cap, traditional tech names. "If you're a large-cap growth investor, you need a momentum component in your portfolio. We've seen a shift from large-cap tech to

Russell 1000

names like

Juniper

(JNPR) - Get Report

and

Sycamore

(SCMR)

."

The

Dow Jones Industrial Average

was in positive territory, up 11 to 10,149, with

AT&T

(T) - Get Report

and Microsoft contributing gains to the index that is signature if the old economy.

"

New home sales

might be giving investors a ray of hope that the

Fed

might be less aggressive in raising rates," said Peter Cardillo, chief strategist at

Westfalia Investments

. "But that all could change tomorrow if the labor cost and unemployment data show any signs of inflation. That could bring an end to the rally in the Dow and we could test last Friday's lows."

Telecom was booming on the

New York Stock Exchange

, with

British Telecom

(BTY)

,

Nokia

(NOK) - Get Report

and

Deutsche Telekom

(DT) - Get Report

all on the upside.

Crude oil's $30-plus price tag has started a buzz of inflation concerns on Wall Street. According to Cardillo, oil's high prices pose a threat to not only the economy, but also to oil producers. "Oil prices are going to be heading down," he said. "

OPEC

has already made a statement that it would raise output, the question is by how much. High prices for oil are a negative for both the global economies and producing nations. Any other substantial rise in oil prices would mean higher inflation, high interest rates, a global economic slowdown and oil prices would collapse."

The broad

S&P 500

was down 3 to 1376, while the small-cap

Russell 2000

was down 7, or 1.1%, to 582, after setting a record yesterday.

Market Internals

Breadth was negative on fairly heavy volume.

New York Stock Exchange:

1,150 advancers, 1,707 decliners, 785 million shares. 92 new 52-week highs, 125 new lows.

Nasdaq Stock Market:

1,867 advancers, 2,219 decliners, 1.4 billion shares. 370 new highs, 73 new lows.

For a look at stocks in the midsession news, see Midday Movers, published separately.