Analysts' AOL Calls Push Tech Stocks Higher

Plus, Cisco beats its estimate.
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SAN FRANCISCO -- Calls by analysts Mary Meeker and Henry Blodget boosted the Internet sector, and a technical guru sees the recent rough patch behind the Net stocks.

Morgan Stanley Dean Witter's

Meeker upgraded

America Online

(AOL)

to strong buy from outperform, while Blodget said recent weakness in

Yahoo!

(YHOO)

presented a buying opportunity. Those comments gave the Internet sector a lift, with

TheStreet.com Internet Sector

index rising 18.7, or 3%, at 654.

John Murphy, president of

murphymorris.com

, a provider of technical analysis, told

TSC

it is "beginning to look more and more like the correction is over" for Internet stocks.

Murphy said

TheStreet.com

index had an upside reversal on May 5 that "may have marked the end of the correction." On that day, the index hit a low of 580.82 before closing at 637.49. The index also stopped short of its April low of 543.65, which was a positive sign, Murphy said, but it still needs to retest and exceed the April 27 high of 731.49.

Murphy also said price action in AOL was promising. The stock traded to a low of 115 3/16 on May 7, testing the April low of 112 made on the 19th. It closed today up 11 1/16, or 9%, at 139 3/8. Murphy said AOL still needs to close above the April 30 high of 147 5/8 to confirm the correction is over, but the real test will be its April 27 high of 167 1/8.

Yahoo! is showing a similar price move, Murphy said. It tested its low of 147 1/8 from March 24, actually trading to 145 on May 7, but still managed to close above 147 1/8 that day before pushing higher. It closed today up 18 5/16, or 12%, at 174.

And while price action among Internet stocks over the past few sessions has been mostly positive, it still remains susceptible to losses should the market focus move back to interest rates. Treasury market yields were higher again today and may have prevented additional progress in technology stocks. The yield on the 30-year bond finished at its highest level in close to a year.

Among the other stocks on the move today was

Sportsline USA

(SPLN)

. The Internet-based sports media company said it had launched a European unit and had also purchased a sports Web site from

Reuters

. That was enough to send shares surging 12 3/16, or 40%, to 43 1/16.

Also,

Network Solutions

(NSOL)

closed up 7 5/16, or 11%, at 75. The company said it entered a relationship with

Lucent

(LU)

to provide technical support services for Lucent's IP Services Product Group.

Also,

Cisco

(CSCO) - Get Report

closed up 2 5/8, or 2%, at 111 7/8 ahead of its earnings report, which showed the networking giant beating the

First Call

estimate by a penny. The company also set a 2-for-1 stock split.

On the downside were two of the principals from Monday's hot news.

Lycos

(LCOS)

, which rallied sharply Monday on reports that

USA Networks

(USAI) - Get Report

might walk away from its deal to buy the Internet portal, was down 7, or 7%, at 98 1/4, after gaining more than 15 points on Monday.

And

CNet

(CNET) - Get Report

, which flourished on news that

NBC

would incorporate

Xoom.com

(XMCM)

with its other Internet properties, including

Snap.com

(co-owned by CNet and NBC), closed down 7 3/16, or 5%, at 129, after gaining more than 22 points Monday.