When shares of eBay (EBAY) - Get Report soared Monday and most of Tuesday, we searched for a reason why and found very little. Likewise, when e.Piphany (EPNY) tumbled over the past two sessions, there was nothing to explain the losses. And while we would never accuse anyone of insider trading, we appear to have the answers today.

eBay was down 13 3/16, or 6.25%, to 197 3/16 as there were conflicting reports about a story that broke on

CNBC

after the close yesterday that the online auctioneer and

Yahoo!

(YHOO)

were in talks about an alliance or merger. Yahoo! was off 6 3/4, or 4%, to 162.

According to

CNBC

, there was a 50-50 chance for a pact between the two Internet superpowers, with a "significantly" smaller chance that Yahoo! would wholly acquire eBay. Meanwhile, the

Financial Times

, citing people familiar with the situation, said that preliminary talks between the two companies ended last week.

There was more substance behind e.Piphany's news. It announced that it was buying

Octane Software

, which like e.Piphany makes e-commerce software, for $3.8 billion. Under terms of the deal, e.Piphany will issue 12.8 million shares of stock to Octane shareholders. e.Piphany was down 17 3/16, or 6.9%, to 231 3/4.

Elsewhere, the Internet sector was backpedaling again despite an early recovery attempt. Our own

James Cramer

was right on the money, noting earlier that he was not too excited about a strong

opening.

TheStreet.com Internet Sector

index was down 43.00, or 3.38%, to 1230.43 in early trading.

TheStreet.com New Tech 30 was down 28.42, or 3.5%, to 774.99.

In his morning note, Dick Dickson, technical analyst with

Scott & Stringfellow

, wrote that the drop in the

Nasdaq

was so far "nothing more than some normal profit-taking." He indicated that the index has retraced one half of the rally from its February reaction low, "an amount that is considered a normal pullback." He wrote that if there was follow-through on the downside, he would watch key support at 4600. And if that was broken on a closing basis, "the market likely has more to go on the downside, perhaps substantially more." But at this point, he felt a test of that level and a rally was a more likely scenario.

Among other stocks in the news,

Amazon.com

(AMZN) - Get Report

was down 5/8, or 1%, to 65 following a negative note about the company from

PaineWebber

, which lowered its price target on the online retailer to 68 from 74.

PaineWebber analyst Sara Farley wrote that yesterday's announced alliance between

America Online

(AOL)

and

Sears

(S) - Get Report

was another example of "significant competition that Amazon can expect going forward," particularly as traditional retailers make a push to get on the Web, either by themselves or with partners. While Farley did not change revenue estimates for 2000, she did lower estimates for 2001 to $4.1 billion (which was 50% annual growth), from $4.5 billion (which was 63% growth).

Farley also increased her per-share loss estimates for the company to $1.33 from $1.30 for 2000 due to higher interest expense from the company's recently issued convertible subordinated notes. Losses for 2001 increased to 42 cents from 24 cents, which may not please those looking for the company to turn a profit sooner rather than later.

In another merger,

FreeMarkets

(FMKT)

announced it signed a deal to acquire

iMark

, a privately-held business-to-business online marketplace for preowned equipment and surplus inventory. FreeMarkets will issue 1.75 million shares and options in exchange for all outstanding shares of iMark. FreeMarkets was down 3/4, or 0.39%, to 193 1/4 in recent trading, though it had traded as high as 204.

Also,

J.P. Morgan

started coverage of

drugstore.com

(DSCM)

with a buy rating and a 35 price target. It was up 7/16, or 2.2%, to 20 5/16.