Net Sector's Momentum Falters in Afternoon Trading

After inching higher this morning, TheStreet.com Internet Sector index was lately heading lower.
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SAN FRANCISCO -- Traders today seem to be following a simple formula for trading: When upside momentum is not on your side, it might be time to sell.

Internet stocks were modestly weaker around midday after an earlier move higher failed to gather any momentum.

TheStreet.com Internet Sector

index was down 13.70, or 1.6%, at 820.90. It had earlier stalled at 847.72.

Momentum has been behind

RealNetworks

(RNWK) - Get Report

since it launched its

Real.com Network

earlier this

week, but it was stopped in its tracks on news of a lawsuit against the company. It was off 4 1/2, or 3.3%, at 131 3/8 in recent trading.

A group of music consumers took the streaming-media company to court Wednesday over recently

exposed information that its RealJukebox software secretly monitors the listening habits and other activities of people who use it. Subsequently, RealNetworks said it would cease collecting the information from listeners and disable the tracking feature on the software.

News.com

reported that Wednesday's class-action lawsuit was the second filed against the company over privacy. The suits claim RealNetworks violated unfair-business-practices law and accuse it of deceptive business practices. RealNetworks claimed the litigation was "meritless," according to the article.

InterVU

(ITVU)

, a provider of Internet audio and video delivery solutions, was up 7 1/4, or 11.4%, at 70 13/16 after it announced an alliance with

CNN News Group

. InterVU will deliver live and on-demand broadcast streaming services for

CNN

and

Turner Broadcasting System

for their online content. CNN will invest $20 million in InterVU.

Salomon Smith Barney

analyst Richard Zandi presented a more sanguine view of online brokers in lieu of recent gains tied to reports of increased trading volumes after a soft third quarter. In a research note, Zandi wrote that although there were reports that trading volume increased in September and October, the online brokers' share of the total

Nasdaq Composite Index

volume actually fell 3% to 28% in the third quarter.

Zandi noted that there could be a number of possible reasons for the change, including a shifting mix of retail and institutional activity and/or the relative resurgence of retail trading activity executed by traditional brokers. But the important thing to take from this, he wrote, is that a key assumption supporting the current market valuation of the online brokers is continued rapid growth. "If this assumption is valid, one would have expected the online brokers' market share to increase despite shifting mixes."

Zandi concluded that fundamental share valuations of online brokers "should be based on long-term estimates of franchise value rather than near-term market volatility."

PC Data

reported that fresh on the heels of

Excite@Home's

(ATHM) - Get Report

purchase of online greeting card company

bluemountainarts.com

, greeting card sites registered large gains in its latest survey. bluemountainarts.com remained the frontrunner among the card sites with a ranking of 21 in PC Data's top 100 Web sites in terms of traffic (up from 29 in September), with a 25% increase in traffic. But both

Americangreeting.com

climbed to the No. 72 slot from 379 in September with a 248% growth in traffic, while

egreetings.com

claimed the 94 position from 151 in September with a 54% increase. Today, Excite@Home was off 1 3/4, or 4%, at 42 1/2.

Sean Wargo, Internet analyst for PC Data Online, noted that while bluemountainarts.com continued to maintain its market share and a loyal customer base amid new competition, "judging by the sharp growth of its competition, its potential base may be considering other options."

PC Data also noted that significant growth occurred for online sweepstakes and casino-style gaming sites. In its first full month of operation,

iwon.com

landed at the No. 81 position. Others with notable traffic increases were

freelotto.com

with a 146% increase (No. 35),

prizecentral.com

with 52% (No. 55),

virtualvegas.com

with 50% (No. 97),

uproar.com

with 26% (No. 33) and category leader

alladvantage.com

with 22% (No. 16).