Shares of technology companies tumbled on Thursday as a selloff in shares of Chinese Internet company Baidu.com fueled concerns that the recent tech rally may be coming to a close.
The slide came after JPMorgan cut its third-quarter revenue target for Baidu
by $2.2 million, or 3.2%.
The Nasdaq tumbled 1.4% on the day, down 39.41 points. Baidu shares fell 10% to $308.78. Other high-flying stocks including Apple and Research In Motion also fell.
"You are seeing the classic bubble being burst in the best-performing momentum names such as Baidu.com, Apple and Research in Motion. Once these stocks started falling, the selling begat selling as everyone headed for the exits at one time," said Tim Biggam, lead options strategist at online brokerage thinkorswim in Chicago.
"This is a mini-version of what we saw at the height of the dot-com bubble in late 2000 and early 2001," Biggam said. It will be interesting to see what happens on Friday."
In a note to clients, analyst Dick Wei projected Baidu revenue of about $65.7 million versus his previous target of $67.9 million. Adjusted earnings per share would be in line with his previous forecast of 68 cents, he wrote.
Blackberry maker RIM fell 5% to close at $111 on the Nasdaq, bouncing back from a low of $105.02 touched earlier in the day. That drop is small compared to the stock's sharp ascent in the last 12 months. Since October of last year, the stock has more than tripled amid soaring demand for RIM's lineup of smartphones.
"A competitor of mine held a conference call with Denni Kavelmann (RIM's COO) discussing Latin America and the market didn't like some inventory and accounts receivable answers for whatever reason," said Canaccord Adams analyst Peter Misek.
RIM's plunge came in tandem with declines by other big momentum stocks. Apple gave up 2.7% to close at $162.23 after touching a low of $153.21
for the day.
"I think JP Morgan cutting revenue estimates in Baidu was the catalyst," said Peter Boockvar, equity strategist at Miller Tabak & Co. "It's one of the poster boys for the speculation that's been going on in Chinese stocks and also big-cap, high-flying, over-the-counter tech stocks."