Net stocks fell Tuesday, dragging down the tech sector as traders cashed in on recent gains. Even the Dow, which had been up most of the day, reacted to the market's mood and ended up falling. Apple’s much supported Internet strategy meant the company also fell prey to the changing mood.

Apple’s recent gains are widely regarded as conditional on a successful Internet strategy. The tech-aware investor sold up while stocks were ahead. Apple closed down $4.125 at $94.875.

Others took a fall too. TheStreet.com's Internet sector index sank 4.9 per cent, and Nasdaq fell 2.36 per cent to close at 3571.67. The Dow lost 0.29 per cent to finish at 11160.17.

In the afternoon, rumours that the federal government was close to settling its lawsuit against Microsoft, added to the downward momentum. Rumours on Wall Street were especially bad for Microsoft’s competitors, who have gained in recent months, as Microsoft's legal problems mounted. America Online dropped $5.63, or 6 per cent, to $88.38, after spending much of the day hovering around the break-even point. Microsoft itself gained $2.06 to $98.69. Other stocks that slid fast in the steep, late-day sell-off included Yahoo, CMGI, EBay and Amazon.com.

The retail sales report from the Commerce Department showed higher-than-expected spending in November, sparking interest-rate worries. This hurt the financial sector, including online brokerages.
Net infrastructure and hosting was about the only sector to see gains on Tuesday. Digital Island, and Exodus Communications made some progress.