Net stocks sink after rate cut

Net stocks sink after Fed rate cut

CHICAGO (CBS.MW) — Internet stocks tumbled in volatile trading Tuesday after the Federal Reserve reduced lending rates by half a basis point in a move to stave off a recession at home amid mounting evidence of economic weakness abroad.

The Goldman Sachs Internet Index ($GIN) dropped 5.8 percent. Merrill Lynch B2B Internet Holdrs (BHH) were stuck lower immediately after the cut, off 5.7 percent. Merrill Lynch Internet Holdrs (HHH), however, were down 3 percent as well.

The Fed was clear in its statement issued along with the rate cut that weak demand and excess production capacity make a dangerous cocktail for the U.S. economy. A declining stock market and rising profit pressure are behind reduced corporate spending as well, it said.

Inktomi Corp. (INKT) ended the day up 1.8 percent, or 11 cents, to $6.39; however, shares had advanced as much as 10 percent during intraday trading. Ariba Inc. (ARBA) closed down $1.06 to $10.31.

Big gun AOL Time Warner Inc. (AOL) also turned lower to end the day below $40: shares fell $1.11 to $38.79. EBay Inc. (EBAY) fell $1.75 to $37.31. Yahoo Inc. (YHOO) fell $1 to $13.94.