A Nearly Net-Free Rally

SAN FRANCISCO (02/02/2000) - Internet stocks rallied along with the rest of the technology sector, but without the gusto seen in the broader market.

While the Nasdaq Composite Index was registering a triple-digit gain, TheStreet.com Internet Sector index could manage only a 21-point gain, or 2.0 percent, to 1073.22. The Nasdaq added 111.63, or 2.9 percent, to 4051.98. The Dow rose 100.52, or 0.92 percent, to 11041.05.

Why did Net stocks not rally with a vengeance like the rest of the techs? Well, the events of last Friday and early Monday are still fresh in the minds of investors who watched many of their favorite stocks quickly lose a good portion of their value.

With earnings season mostly behind us, there could be few catalysts to drive the sector in coming weeks, particularly with many stocks running up into their numbers. The Federal Reserve's two-day policy meeting, which began Tuesday, will lead many traders to wait on the sidelines.

One Internet bellwether that has yet to report earnings is Amazon.com, which is set to go Wednesday after the close. Ahead of its report, Amazon announced yet another partnership, this time with living.com, an online home furnishings site. Under the deal, living.com will receive prominent placement on the Amazon home page. Amazon will buy an 18 percent stake in living.com, with the option to buy another 9 percent. living.com, which sells furniture, bedding, decorative accessories and other related home categories, will pay Amazon $145 million over the next five years for the exposure.

It's deals like this, and previous ones announced over the past couple of weeks, that have analysts believing that Amazon is on the road to profitability. Banc of America Securities upgraded Amazon to "buy" from "market perform" even before it knew about the living.com deal, which also helped the stock. It finished up 2.88, or 4.5 percent, at 67.44.

Also benefiting from a new partnership was business-to-business play VerticalNet. The company said it entered into a partnership with British Telecommunications and Internet Capital Group to form VerticalNet Europe, which will create a number of Web sites to allow European companies to trade goods and information. VerticalNet ended up 13.88, or 6 percent, at 252.13, then announced a 2-for-1 stock split after the close along with its fourth-quarter earnings. VerticalNet reported a loss of 28 cents, which was six cents better than expectations. Whether that will be enough for the stock to trade higher Wednesday remains to be seen, as many stocks have seen post-earnings profit taking this season regardless of their numbers.

Network Solutions was the other big winner, closing up 32.44, or 15 percent, at 249.31. The company said Tuesday that the U.S. Department of Justice's antitrust division had ended an investigation into whether the company's domain name registry violated antitrust statutes. The investigation questioned whether the company unlawfully dominated the registrar business through its control of the registry where names are logged.

But Tuesday was not a success for all Net stocks. Yahoo finished down 4.69, or 1.5 percent, at 317.38, though it traded as high as 329.75. The stock has been under pressure for close to a month since reporting earnings on Jan. 11. It has lost more than 35 percent of its value since Jan. 4, when it traded as high as 500.13. While the Net sector no longer follows one stock so closely, it may need Yahoo's participation if the sector is to rally with a little more pep.

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