It may go up, and it may go down, but the one cardinal rule of the stock market -- especially in the new economy -- is that it will fluctuate.
That rule applied to the extreme Wednesday, as the Nasdaq headed into a zany day of high-velocity trading that kept markets' indices flipping from positive to negative territory.
After withstanding a record loss and a lightning-fast recovery that left it down about 2 percent at 4,149 Tuesday, the technology-heavy Nasdaq Composite index couldn't quite decide which way to go Wednesday. The index rose as high as 4,257 and dipped as low as 4,009 by midday.
By mid-afternoon, things were looking more positive though still mixed, with the the Nasdaq up 108, the S&P 500 up 5 points, and the the Dow Jones Industrial Average down 98 points.
Investors, meanwhile, shifted between picking up bargains and selling off tech stocks perceived as too pricey relative to performance. Those hardest hit included smaller e-commerce sites -- such as drkoop.com and cdnow -- and a number of companies that went public in recent months and got huge early run-ups, which have subsequently been erased.
"Obviously, yesterday and what's been going on for a week or so is an indication that maybe there's a realization dawning that these stocks have been overpriced relative to other sectors," said Charles Hill, director of research at First Call.
"The volatility is rampant," said Richard Peterson, market strategist at Thomson Securities Data. "In many of the Internet stocks, the bubble is beyond burst."
Many of the companies that had very lucrative debuts in the last few months are already seeing shares crash to earth. One example Peterson cites is PSFWeb (PSFW), which provides services for making online transactions, which tumbled from an opening day high of $52 to about $13. Perhaps the most prominent example is Palm Computing, whose shares now selling for $42, after soaring as high as $165 in its IPO last month.
Established tech companies performed better. Oracle (ORCL), Motorola (MOT)were each up about 5 percent, while Sun Microsystems gained 2 percent. The exception was Microsoft, which has lost about a fifth of its value this week, and dipped another 2 points Wednesday.
Internet stocks were mixed, as the sector awaits earnings from Yahoo, expected after the market closes. Yahoo is the first of the large Internet companies to report quarterly earnings, and is seen as a bellwether for the rest of the sector.
Most closely watched Internet and technology companies are set to release first-quarter earnings later this month, which is likely to intensify volatility in the tech sector.
Hill expects tech earnings to be solid, with the sector's income for the year forecast to grow a healthy 29 percent. He cautions, however, that strong earnings might not sufficient to prevent a sell-off, since most technology shares are trading at valuations that have little to with current profits.
Meanwhile, one of Wall Street's most closely followed luminaries cautioned investors not to panic.
"For the past decade we have been enthusiastic about the outlook for stock prices in the United States and we remain so," said Abby Joseph Cohen at a White House conference on technology and the "new economy."
Cohen, an analyst at Goldman Sachs and one of Wall Street's most influential figures, contributed to a broad dip in tech stocks last week, when she disclosed that she was reducing holdings of technology issues.
At the same time, analysts at Merrill Lynch released a report to clients that "advises investors to use this week's market volatility as a signal to re-examine their portfolios with an eye toward broader diversification."
