SAN FRANCISCO (07/31/2000) - Capping a week of increasingly negative activity, the Nasdaq plunged nearly 5 percent Friday, closing far below the 4000 mark.
Disappointing earnings had led to sell-offs earlier in the week, but fears of rising interest rates seemed to drive Friday's drop.
Those fears were prompted by a government report released this morning, which found that the gross domestic product jumped 5.2 percent in the second quarter.
The figure had been expected to grow only 3.7 percent - and the gap, a hint that the economy is still growing rapidly, seemed to scare investors into believing that the Fed could continue raising rates. Fed chief Alan Greenspan's committee will meet again at the end of August.
The Nasdaq fell 4.66 percent Friday, dropping 179.12 to close at 3663.11. The Dow remained steadier, losing only 0.71 percent, or 74.96, to 10511.17.
The only companies to buck the downward trend Friday were brand-new ones.
Indeed, IPOs went out of the park Friday, following a number of recent hits.
Out in front was Avici Systems, a maker of high-speed networking equipment.
Avici's stock, which priced at a higher-than-expected $31, soared 210 percent to close at $96.06.
Fiber-optics equipment maker Corvis was close behind. Corvis' stock priced at $36, also much higher than expected, but that didn't stop it from skyrocketing 127 percent. Corvis gained $45.87 to close at $81.87.
Even issues outside of the popular networking and optics sectors enjoyed success Friday. Internet provider WebEx gained 145 percent, or $20.94, to close at $34.31. And the telecom company Lexent soared 70 percent, or $10.56, to $25.56. Biotech firm Illumina jumped 140 percent, or $22.37, to close at $38.37.
Nortel announced plans to buy Alteon for $7.8 billion in stock. The acquisition would put Nortel in a better position to compete with rival Cisco, which recently made a $6 billion acquisition of ArrowPoint Communications, Alteon's rival. Both Nortel and Alteon fell on the news: Nortel lost nearly 8 percent, while shares in Alteon dropped almost 10 percent.
Nokia Corp. (NOK) 's stock recovered a fraction of Thursday's huge loss, rising 5 percent, or $2.12, to close at $43.19. The semiconductor sector similarly limped toward gains, with Rambus (RMBS) up 6 percent, gaining $4.06 to close at $70.75. LSI Logic (LSI) still suffered, though, dropping almost 5 percent to $3.37.
Large-cap tech stocks were mixed Friday, with bigger losses coming from Intel Corp. (INTC) and Cisco Systems Inc. (CSCO) . Both IBM Corp. and Microsoft Corp.
(MSFT) avoided losses for the second day in a row, both rising just under 1 percent. The Internet sector didn't fare so well. A rare gainer there was DoubleClick (DCLK) , up 8 percent, or $2.81, to $36.87. Financials were down across the board Friday, apparently on fears of additional interest rate hikes.