Climb aboard the bandwagon, or wait until the Fed's train pulls into the station? That was the debate with investors today, after the Nasdaq Composite Index posted gains for its second-straight session, but faded in the final hour.
The Nasdaq closed up 29.46, or 0.84%, at 3529.04.
TheStreet.com Internet Sector
index was up 9.51, or 1.1%, at 843.56.
James Deasy, Nasdaq trader with
Credit Suisse First Boston
, said he was seeing short-covering, but also noticed institutions buying stocks.
"It does feel like the worst is over for the short term," he said, though he also said that the lows from last month could still be tested again. Deasy said that Tuesday's
meeting remains the wild card, with uncertainty in the marketplace about whether the Fed will raise rates by 25 basis points or 50.
And while the amount of the rate increase will be important, Deasy said that people are waiting to see the Fed's statement accompanying the rate increase, which could signal how aggressive the Fed might be in the coming months. If the Fed were to raise rates by 50 basis points, but maintain a tough-talking stance, investors could run scared.
"The market's in a very nervous state," said Deasy. "There's not a lot of volume. It can react in a pretty significant way either way."
Traditional Internet stocks were among the better performers, although some sank near the end of the day.
closed down 1/8 to 125 11/16;
was up 3 7/8, or 3.3%, to 121 5/16;
fell 2 5/8, or 2%, to 119 3/16; and
was up 2 11/16, or 5%, to 54 1/8. Lycos gains came after
confirmed it was in merger talks with the portal. Terra was up 2 3/4, or 4.9%, to 59 3/8.
And a group of stocks that was punished over the past few days also was on the mend.
, which slid in sympathy with
, was up 15 7/16 or 10.4%, at 163 3/8.
was up 1 9/16, or 2.2%, at 70 3/4.
Business-to-business stocks were back in fashion as well, likely benefiting from some short-covering.
was up 3/8, or 1%, at 39;
was up 13/16 or 2%, at 40 1/16; and
was up 6 1/16, or 6%, at 108 9/16.
Technical analysts suggested that gains would be extended today, and that the trend could continue into next week. In his daily commentary, Richard Dickson, technical analyst with
Scott & Stringfellow
, wrote yesterday's rally "was a little frustrating," with breadth and volume positive enough to justify calling for more on the upside, "but not enough to really validate the idea that the market was blasting off from a sustainable low."
"The market still seems to be setting up for a more sustained rally at this stage, but we'll probably have to wait another 3 to 4 days for enough evidence to surface to decide whether the effort succeeds," he wrote.