The technology-led Nasdaq closed down 35.64 points on Tuesday as Internet shares performed poorly.

The flotation of online floral retailer 1-800-Flowers.com, which had been forecast to be a success, began with the company's shares falling 13% at the close of their first day of trading.

Three other debutant online companies also saw shares finish down by the end of the day.

Inflation fear

Bigstar Entertainment, Splitrock Services, and Internet insurance service Quotesmith.com all fell sharply.

The falls come after a run of hugely successful flotations on both sides of the Atlantic, with the UK's Freeserve and US Net2Phone both making impressive gains on their first days of trading last week.

The fall in Internet stocks is being put down to investors seeking more stable shares as they brace themselves for the possibility of inflation rearing its head in the US again, forcing the US central bank, the Federal Reserve, to push up interest rates.

Almost all of the Internet companies floated so far have yet to make a profit, a fact that seems to have more cautious investors looking for more familar ports in anticipation of the economic storm an interest hike would bring.

Volume down

Jim McCann, chairman of 1-800-Flowers.com, said: "I think it will be a lot tougher for companies that don't have the strength, don't have the profitable operating history that we have, to come to the market in such a tight, tough, questioning market - for the whole sector, but especially for Internet-concentrated companies."

Bill Burnham, Internet stock expert and analyst at Credit Suisse First Boston, said the volume of shares traded in the leading technology companies was down by 54% in July compared to its April peak.