Great Expectations

The volatility continues. Traders decided to ignore Yahoo's continuing slide Thursday, and Net stocks headed back up after two days of losses.

TheStreet.com's Internet Sector index gained a healthy 6.43 percent as the Nasdaq rose 2.78 percent to close at 3957.21. The Dow gained 0.27 percent to finish at 11582.43, a record high.

On Wednesday, traders took down Net stocks partly in reaction to Yahoo's fall, which resulted from the company's positive earnings report not being positive enough for the Street. Thursday, Yahoo fell again, but traders - as is their wont - had moved on to other concerns.

A recovery for America Online may have had something to do with the market bounce-back. AOL shares dropped for three days after Monday's announcement of its merger with Time Warner. Thursday, AOL gained back some of those losses, heading up $4.94, or 8.23 percent, to $65.

Time Warner shares, which gained big on the announcement before losing ground Wednesday amid a general market slump, gained $4.38, or 5.5 percent, to $84.

The renewed optimism for the merger spread to other parts of the Net sector.

ExciteAtHome, a direct competitor with AOL Time Warner, shot up $6.94, or 19.48 percent, to $42.56 on speculation that it will hook up with its own merger partner.

RealNetworks also saw a big jump, thanks to Deutsche Banc Alex. Brown's Larry Marcus. The analyst initiated coverage of the company with a "strong buy" rating and an 18-month price target of $250. Marcus believes Real will benefit from the AOL-Time Warner merger, which he says will give the leading media software company a bigger platform. Shares surged $26.44, or nearly 21 percent, to $152.69.

Inktomi, the Net software firm that runs AOL's search service, gained $14.69, or 16.83 percent, to close at $102, also on optimism about its platform expanding thanks to the merger. Inktomi shares have been extremely volatile this year. Last week, they lost nearly 15 percent in three days before shooting up to reach an all-time high of $104.88 in Monday's market surge. In the past two days, they took a huge dive, bottoming out Wednesday at $87.31. In the past year, Inktomi has gained 155 percent.

Shares of free-ISP NetZero zoomed $7.13, or 28.6 percent, to finish at $32.06 on news of a marketing alliance with General Motors. The auto maker will join NetZero to provide co-branded Internet service, which GM will use to target car buyers and beef up online sales efforts. The four-year pact would add $68 million to NetZero's top line, the company said.

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More about America OnlineAOLBancHolden- General MotorsInktomiNetZeroRealNetworksTheStreet.comTime WarnerTop LineYahoo

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