Taken at face value, it was an ugly day in the Internet sector. But a quick look under the sheets reveals that today's losses in many stocks were nothing more than profit-taking after a pre- and postearnings run-up fueled by retail investors.

And that's even discounting a pre-end-of-the-year rally in the Net sector that had little fundamental basis. If it continues next week, then we could be talking something different.

TheStreet.com Internet Sector

index, or DOT, closed down 65.73, or 5.76%, at 1075. Losses were triggered by strong economic

data this morning, with momentum taking over and driving prices lower. Traders rushed to take profits, and there was some chatter about margin calls contributing to the selloff.

It was a troubling day for any number of Net stocks, including DOT component

Yahoo!

(YHOO)

, which closed down 23 7/8, or 7%, at 313 1/2 as traders continued to punish the stock.

Amazon.com

(AMZN) - Get Report

, another member of the index, finished down 5 1/4, or 8%, at 61 11/16. Contributing to the losses was news from the company that it would be laying off 150 employees, or 2% of its workforce. Though the company claimed that the layoffs were not due to seasonal factors, there was still some uncertainty in the marketplace about just what the layoffs meant.

Sara Farley, e-commerce analyst with

PaineWebber

, said it would be easy to spin the story about layoffs in a positive light, in that it would be getting rid of some "deadwood." But she still had questions that she felt would be addressed when the company reports earnings on Wednesday.

"This is not the first year they have grown exponentially, so why now?" asked Farley. "Were those people so unproductive that they couldn't be redeployed? Doesn't it cost more to hire a new person and train a new person than keeping the people you have?"

Farley, formerly at

Warburg Dillon Read

, also questioned why the company had to announce that it was making a relatively small layoff, other than it wanted to be proactive against fears that people who were let go would spread the news.

"There may be very valid answers, but they are questions that we are asking that investors should be asking and hopefully will get a better sense of what's going on when they hold their conference call," she said.

Back to the rest of the show. Sure, losses were steep in some cases, but in many instances, stocks merely gave back what they had gained in recent sessions. Unless you bought at the top, the damage shouldn't be that great -- unless this is the start of something bigger.

Among stocks that were hit hard today,

LookSmart

(LOOK)

closed down 9 1/8, or 20%, at 36 after reporting its quarterly results yesterday. But note that LookSmart added 7 points ahead of its report. LookSmart bested expectations with a loss of 21 cents for the fourth quarter vs. the 31-cent Street estimate.

And

InfoSpace

(INSP) - Get Report

closed down 15 3/4, or 9%, at 151 3/4, though that's still above the 140 level, where it closed Wednesday in front of its financial report.

RealNetworks

(RNWK) - Get Report

closed down 17 3/8, or 10%, at 157 7/16, but that left it almost exactly at the 157 7/8 level, where it closed Tuesday, just before its financial report.

Finally,

E.piphany

(EPNY)

closed down 33 7/8, or 18%, at 149 3/8, though note that the stock was trading as low as 125 on Jan. 13 and merely had a pre-earnings run-up and traders were taking profits on those gains.