Pressure Drop

Interest-rate worries took the bond market down Tuesday and stock traders took profits from Monday's run-up, sending most equities lower.

Internet stocks weren't spared. TheStreet.com's Internet Sector index dropped 5.47 percent as the Nasdaq ended down 3.14 percent, at 3922.63. The Dow fell 0.53 percent, ending at 11511.08.

Helping to drag down the Net sector was Yahoo, which fell $38.69, or 8.87 percent, to close at $397.38. Traders were worried that earnings - announced after the close - wouldn't measure up to their expectations, though everybody thought they would meet or exceed those of Wall Street's analysts.

And so they did. Earnings came in at 15 cents per share, just what analysts expected. But that's not good enough for many traders, who have come to expect profitable Internet companies to exceed estimates by a wide margin.

Yahoo's "whisper number" - essentially, the unofficial earnings estimates of analysts - was at around 21 cents per share, and that's what the Street wanted to hear. Revenues, though, beat expectations by a healthy margin, coming in at around $201 million. Analysts had expected $184 million.

Yahoo also announced another 2-for-1 stock split. After-hours trading in Yahoo shares was temporarily halted after the announcement.

Also taking the sector down was Monday's announcement of a mega-merger between America Online and media giant Time Warner. AOL holders took a harder look at the premium AOL is paying for Time Warner, and they didn't like what they saw.

As a result, AOL dropped $8, or 11.01 percent, to finish at $64.63. Time Warner shares, which jumped Monday on the announcement, fell $7.25, or 7.86 percent, to close at $85.

Like Yahoo, Ariba, the business-to-business e-commerce company, fell as traders fretted over its earnings announcement. Shares dropped $3, or 1.55 percent, to close at $191 on heavy trading. Results were better than anyone expected though, with the company reporting a loss of 7 cents per share. Analysts expected a 12-cent loss. In after-hours trading, Ariba was up $7.

Another business-to-business company, Kana Communications, announced a 2-for-1 split, and shares rose $19, or 9.64 percent, to close at $216. Shares had traded as high as $243.50.

Good earnings news helped pump up Juno, which decided to release results during trading. Shares rose $3.63, or 9.55 percent, to close at $41.63. The company reported that while losses widened in the fourth quarter to $15.7 million, or 45 cents per share, revenues more than doubled to $18.1 million. Analysts had expected a loss of 55 cents per share. The company said most of its loss can be attributed to marketing costs.

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More about America OnlineAOLAribaKana CommunicationsTheStreet.comTime WarnerWall StreetYahoo

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