Net Sector Firm, but Cautious, Before Price Data

Investors in Internet stocks, sensitive to higher rates, will be watching Tuesday's CPI data closely.
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The Internet sector appeared poised to rally today but was kept in check as caution reigned ahead of Tuesday's Consumer Price Index report.

TheStreet.com Internet Sector

index closed up 12.71, or 2.4%, at 541.12. The DOT reached a high of 547.47 at around 11:15 a.m. EDT before sellers/profit-takers emerged, though it closed on a strong note.

The sector's caution was probably wise. The Net sector has been sensitive to fluctuations in interest rates. And while Friday's benign

PPI

report has fueled hopes for an equally benign CPI, the CPI is more comprehensive -- and any unexpected strength could reignite fears that the

Federal Reserve

could aggressively raise interest rates. Likewise, a tame report could lead to another broad-based rally. The Fed will have the last word when it meets Aug. 24.

The concerns were clearly seen in the performance of a number of stocks that have had huge upward moves in recent sessions, but saw profit-taking today. Internet infrastructure plays were among the largest point decliners on the

Nasdaq

.

Redback Networks

(RBAK)

, which gained more than 50 points last week, closed down 6 7/16, or 3%, at 213 9/16. Note that the stock traded as low as 200 twice in today's session, but found buyers waiting at that level. Also,

Juniper Networks

(JNPR) - Get Report

, which also gained more than 50 points last week, closed down 9 3/4, or 4.6%, at 204. Like Redback, Juniper also found buyers waiting at the 200 level on a number of occasions during the session.

Two hot IPOs from last week,

Red Hat

(RHAT)

and

Qwest Software

(QSFT)

also saw profit-taking. Red Hat closed down 10 3/4, or 13%, at 74 1/2, while Qwest Software ended down 7 5/8, or 16%, at 39 3/8.

On the upside were a couple of audio-related Internet stocks.

Audible

(ADBL)

, which delivers audio versions of books and newspapers over the Internet, closed up 3 3/16, or 30%, at 13 7/8. The company announced agreements with both

Microsoft

(MSFT) - Get Report

and

RealNetworks

(RNWK) - Get Report

to provide access to Audible's audio content. Microsoft finished down 3/8 at 84 5/16, while RealNetworks finished up 4 7/8, or 6.5%, at 80 1/8.

Emusic.com

(EMUS)

closed up 1 5/16, or 9%, at 16 7/16 after it said it would offer downloadable music on a number of

America Online

(AOL)

services. AOL closed down 2 1/16, or 2%, at 94 13/16 after trading as high as 98.

The clear winner among the Net bellwethers was

eBay

(EBAY) - Get Report

, which closed up 11, or 11%, at 109. The only news out on the online auctioneer was that -- along with

SkyTel Communications

(SKYT)

-- it is unveiling pagers that allow users to receive updates on their eBay auctions. Traders that went short eBay due to all its recent technological problems continued to get squeezed. SkyTel finished down 3/16, or 1%, at 19 13/16.