Technology stocks tanked for a third consecutive day as investors realized the current high prices cannot be sustained no matter how good this quarter’s profit reports are.
The Nasdaq composite average nosedived, plunging 189.22, or 3.91 percent, to 4,644.67. So far this week, the technology-packed Nasdaq has lost 6.41 percent of its value, though it is sitting on a year-to-date gain of 14.14 percent.
The blue-chip averages had a better day, with the Dow Jones industrial average posting a gain of 82.61 to 11,018.72. The S&P 500 index added 0.79 to 1,508.52.
But the most-actively traded stocks yesterday were all tech names and almost all of them are Nasdaq stocks.
Cisco Systems fell $1.81 to $76.06; Dell Computer dropped $2.06 to $53.81, and Intel lost $3.81 to $131.88.
Meanwhile, Mark Mobius, one of the best-known portfolio managers of international funds, said he believed the U.S. market averages could fall by 50 percent. He also termed Internet stocks “dangerous,” a harsh comment for a man who’s been called the Indiana Jones of investing.
That sparked an immediate sell-off in Internet stocks. Yahoo fell $17.94 to $177.06, while Doubleclick dropped $9 to $97.63.
Top Wall Street strategists have been putting out bearish signals.
Yesterday, Peter Canelo, the equity strategist at Morgan Stanley Dean Witter, upped the equity weighting in his model portfolio from 65 percent to 70 percent, but said the buying opportunities lie overseas.
Earlier in the week, Goldman Sachs guru Abby Joseph Cohen reduced her equity weighting and said she would no longer overweight with tech stocks because of their high valuations.
The average stock on the Nasdaq 100 Index trades at 160 times this year’s earnings. By contrast, the average S&P 500 stock trades at only 32 times this year’s earnings.