AND NOW, THE UGLY SIDE OF MOMENTUM: WHAT DAY TRADERS CHAT UP CAN BE SWIFTLY TALKED DOWN

Maybe they should call it moo-mentum investing.

Though there’s surprisingly little agreement over why the markets behave as they do, most pros concur that investors tend to share a herd-like mentality. Stock investors’ run for the exits last week seemed very much like a stampede, anyway.

The tech-heavy Nasdaq Composite was stomped particularly hard, falling 8.0% through Thursday’s close to settle 256 points below its one-year high of 2652.05, established in April. On Wednesday, it suffered its third-heaviest one-day point drop ever: 72 points.

Even more-mature issues in the tech sector, like Yahoo! Inc. and America Online Inc., fell precipitously. As of Thursday’s close, Yahoo!, at $139, was 43% off its year-to-date high, while America Online, at $116, was down 34%.

“Maybe there’s been some sort of triggering event and maybe not,” says Joshua Dietch, a consultant at Boston research firm Cerulli Associates Inc.

More important, he suggests, there is an overreliance by individuals on how other investors are reacting to the market. “It’s sort of like an old western, where you get a crack of lightning and all the cows run off in one direction.”

Paul Fenwick, a financial adviser in Westfield, Mass., is feeling the pain of last week’s run. Mr. Fenwick, a self-proclaimed active trader, has helped numerous clients procure Internet-related stocks, including @Home Corp. and eBay Inc.

While they’re still ahead, he says, he’s sitting on pins and needles right now.

Mr. Fenwick, too, sees investors wrongly using the actions of other investors as a yardstick — including institutional stock pickers.

“Mutual fund managers tend to be pack animals,” he says. “I haven’t seen any fundamental changes in the companies I invest in, yet I’m seeing trades of one thousand shares of $200 stocks go through. I don’t know how many individuals move $200,000 out of one stock at a pop.”

Certainly some fund managers have taken profits. Earlier this month, William Miller of

the Legg Mason Value Trust fund announced he had begun unloading some of his long-held AOL shares, calling the company (then trading at around $130) “significantly overvalued” when compared with the biggest U.S. companies.

Yet according to Autex, a division of Thomson Financial Services that tracks block trading, it’s not really clear who is causing the hullabaloo.

Charles Schwab Corp., which traded about 12% of Internet-related shares in April, accounted for just 13% last week. Autex reports that Merrill Lynch & Co. Inc., the third most active Internet-stock trader, actually traded less than its market share in April: 5.5%, vs. 6.5%.

Perhaps more important than who is spurring the sell-off is what.

Mark Riepe, vice president of Schwab’s Center for Investment Research, sees the market as fearful of a hike in interest rates hinted at by Federal Reserve Chairman Alan Greenspan during a speech two weeks ago.

History shows that higher rates tend to hurt high-growth stocks because of the debt they may carry.

Brian Belski, chief investment strategist at Kansas City investment bank George K. Baum & Co., suggests that the biggest catalysts for the tech market’s sudden slump are a shortage of earnings news last week and the fact that the market is heading into “the psychology of the summer months, when everything slows down.”

Or perhaps a surfeit of Internet issues is finally taking a toll. Already this year, 48 Internet-related initial public offerings have taken place and more than 60 are seen on the horizon, according to IPO Value Monitor in New York. In contrast, there were just 26 such IPOs in all of 1998 and 14 in 1997.

That might explain the market’s markedly lukewarm reception of several public offerings last week. Online bookseller BarnesandNoble.com, for instance, ended its first day on the market with shares just 27% above the offering price of $18 .

That was far from the results of Internet IPOs like eToys and iVillage, which saw 283% and 234% first-day pops, respectively.

DLJdirect’s IPO rose 50% on its first day, but IPOs for Ziplink Inc. and Juno Online Services closed down, and Edgar Online barely got his nose over the break-even fence.

Taken together and added up, what does it mean?

Not much, says Mr. Riepe. “Figuring out why millions of individuals or dozens of institutions act the way they do in upticks or downticks is impossible.”

Looming fears about interest rate hikes and inflation might be partly responsible for buckling technology shares, concedes Cerulli’s Mr. Dietch. More likely, though, it’s less logical than that. “Sound reasoning is sort of out the window; people are simply moving on momentum.”

On that premise, most are bracing themselves for a bumpy ride the next few weeks.

Says Mr. Belski: “We may see a turnaround when second-quarter earnings announcements are made” in July. Even then, he’s not expecting anything “cataclysmic. I think the market has run its course in terms of immediate upside for the next few months.”

That could mean more uncomfortable days for individual and institutional investors who may endure more heart-clutching drops. For others who’ve been standing on the sidelines, the news might appear somewhat rewarding.

“When your clients are getting returns of 40% or 50% with their play money, they start to wonder why they are paying you,” says Mark Cortazzo, a financial adviser in Denville, N.J. “Days like these hopefully remind them that the Internet gravy train can — and likely will — derail.”