Net Stocks Surge as Microsoft Shock Proves Short-Lived

Net stocks were up sharply today, with Amazon, priceline and eToys notable gainers. The DOT index hit new highs.
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Revenge of the Nerds seems a little harsh, but a number of Internet stocks that have fallen out of favor of late helped carry the sector higher today.

Amazon.com

(AMZN) - Get Report

,

priceline.com

(PCLN)

and

eToys

(ETYS)

all fell out of favor following their earnings reports in late October, but bounced back with a vengeance today for various reasons. Note that the three e-commerce plays have been hit hard in recent sessions by short-sellers, so short-covering likely played a role in the bounceback.

Amazon.com closed up 13 1/16, or 20%, at 78 on news that it would hold a press conference tomorrow to make a "significant announcement regarding its product line." Speculation as to what the announcement would be ran

rampant, with any number of companies linked to making a deal with the online retailer. Principal among those was

Beyond.com

(BYND) - Get Report

, which has been linked to a deal with Amazon in the months

past. It closed up 2 7/16, or 28%, at 11 1/8.

priceline.com bounced back from recent weakness as other media outlets caught up to news we reported

last week that the company would be expanding its name-your-own-price business model to long-distance telephone calls. It finished up 9 1/8, or 17%, at 61 3/4.

Finally, eToys closed up 3 3/16, or 6%, at 55 3/4. Gains apparently stemmed from problems with the

Toys 'R' Us

(TOY)

Web site.

News.com

reported that the Toys 'R' Us site was down both Sunday and today because of strong usage. The company mailed out its

Big Toy Book

of savings over the weekend. Toys 'R' Us closed down 3/8, or 2.3%, at 15 3/4.

Internet stocks actually opened weaker in sympathy with the rest of the market following the

Microsoft

(MSFT) - Get Report

ruling last week. But it didn't take long before investors determined that Microsoft's problems were of little concern to anyone else, and in fact venture capitalists may make more investments in other Internet companies if Microsoft's actions could be limited by the government.

TheStreet.com Internet Sector

index catapulted over its previous all-time intraday high of 824.20 set in April and traded as high as 846.06 before closing up 25.92, or 3.2%, at 840.79, a new closing high.

Gains among the

Red Hots also drove the sector higher.

Red Hat

(RHAT)

software benefited from the Microsoft ruling, closing up 18 1/16, or 21%, at 104. Also,

Phone.com

(PHCM)

closed up 15 1/4, or 6%, at 284 5/16;

Verisign

(VRSN) - Get Report

continued to run, finishing up 11 15/32, or 7%, at 173, while

Internet Capital Group

(ICGE)

closed up 16 1/8, or 9.5%, at 186.

Also part of the rumor mill was

Excite@Home

(ATHM) - Get Report

, which closed up 5 11/16, or 14.5%, at 44 7/8. There were rumors that a long-anticipated deal between Excite@Home and

America Online

(AOL)

could be announced this week. AOL ended up 4 1/4, or 3%, at 149 3/4.

RealNetworks

(RNWK) - Get Report

closed up 4, or 3%, at 139. RealNetworks traded as high as 149 3/4, but was a victim of profit-takers who sold the

fact of an announcement from the company that it had revamped its Web site to become more like a multimedia portal. It also launched a new version of its streaming media software, RealPlayer 7, which makes it easier for users to find audio and video programming.

TSC

foreshadowed the change to a multimedia portal back in

October.

Other streaming media companies also rallied today, though without the benefit of any news.

MP3

(MPPP)

ended up 5 5/8, or 10%, at 61 1/4, while

Liquid Audio

(LQID)

finished up 6 3/4, or 18%, at 43 3/4.