Internet Stock Sell-Off Continues, But Investors Keep Cool

While the Dow rallied nearly 100 points Monday, the Nasdaq in general — and Internet stocks in particular — continued their October nose-dive as concerns about inflation and a possible rise in interest rates persist.

E-commerce stocks and other high-profile Internet issues were among the hardest hit. As the Nasdaq dropped 1.56 percent yesterday, many of the most well-known Internet stocks fell at least twice as hard.

Shares of eBay (Nasdaq: EBAY) fell 4-5/8 to 129-1/2, shares of CMGI (Nasdaq: CMGI) dropped 3-1/2 to 94-5/16, and shares of priceline.com (Nasdaq: PCLN) closed down 3-3/16 to 64-3/8.

In addition, some of the e-commerce infrastructure plays that were among the biggest winners earlier this month fell back to earth. Shares of customer management solutions company E.Piphany (Nasdaq: EPNY) dropped 11-1/2 to 62 yesterday, while shares of e-commerce software company Art Technology(Nasdaq: ARTG) fell 5-3/8 to 37-1/8.

Even some e-commerce companies that received positive coverage or announced positive news yesterday pulled back. For example, shares of upscale e-commerce retailer Ashford.com (Nasdaq: ASFD) fell to 11-5/8 after receiving buy ratings from BancBoston Robertson Stephens, Deutsche Banc Alex. Brown and E*Offering. Meanwhile, online bookstore Fatbrain.com (Nasdaq: FATB) fell 1/16 to 20-3/16 despite news that Paul Allen’s Vulcan Ventures will invest an additional $20 million (US$) in the company.

Sell-Off Not A Surprise

Despite the downturn, however, there seems to be little panic right now. After all, October has been historically tough for the financial markets, and many investors had expected some sort of sell-off during the month. What’s more, this holiday season is expected to be a record-breaking time for e-commerce, and Merrill Lynch’s Henry Blodget is expected to remain bullish about the business-to-business market.

Yesterday, Goldman Sachs’ Abby Joseph Cohen, one of the most respected and influential bulls on Wall Street, remained positive in a note to clients. Cohen argued that the S&P 500 is currently undervalued by five percent.

Notably, it was Cohen who stepped up to the plate and reiterated her bullishness during last year’s temporary market meltdown. By the end of the year, the markets had staged a dramatic comeback.

Some Internet Stocks Hold Strong

One encouraging sign for Internet investors trying to remain bullish is that yesterday’s sell-off was not across the board. Some big Internet stocks actually climbed. America Online (NYSE: AOL) gained 1 to 110, while scorching-hot e-commerce software company Ariba (NASDAQ: ARBA) gained 4-5/16 to 166-5/16.

Although some Internet stocks are climbing, the soft market could lead to some Internet initial public offerings being delayed this week. For now, offerings that are scheduled for this week include networking equipment company Sycamore Networks and BSquare, which sells Windows CE-based software.

All of these IPOs are expected to do well when they go public, but it will not surprise many if these offerings are delayed because of market conditions.