Net Stocks Slip as Interest-Rate Concerns Remain Front and Center

Big Internet names continued to follow Treasuries lower.
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The Internet sector continued to slide Monday morning as investors remained wary of the interest-rate environment.

Net stocks were seeing some follow-through selling after Friday's

slide. The sector remains largely tied to the fortunes of the Treasury market, which slipped late last week after the

Federal Reserve

raised interest rates, and Treasuries were weaker early today. Though prospects for a strong fourth quarter have buoyed many Net stocks, the sector still faces a relatively slow period into the fourth quarter and may continue to key on interest rates in the near-term.

TheStreet.com Internet Sector

index was down 16.79, or 2.9%, to 557.20. Net bellwethers were mostly weaker.

Yahoo!

(YHOO)

was off 2 3/4, or 2%, at 146 1/4;

Amazon.com

(AMZN) - Get Report

was down 5 11/16, or 4.4%, at 122 13/16; and

America Online

(AOL)

was down 2 15/16, or 3%, at 96 1/4.

According to

Interactive Week

,

Lycos

(LCOS)

was negotiating a far-ranging partnership with

DoubleClick

(DCLK)

. The story indicated that Lycos has begun testing DoubleClick systems that handle the serving and tracking of banner ads on the navigation hub and that DoubleClick could eventually replace the ad-serving companies controlled by venture capital firm

CMGI

(CMGI)

that now manage much of the advertising shown on Lycos' network of sites.

Investors were unsure how to interpret the news. In early trading, Lycos was down 7/8, or 2%, at 41 3/16. DoubleClick was off 1/8 at 103. And CMGI was down 3 1/8, or 3%, at 84.

EarthLink

(ELNK)

was higher after the Internet service provider said it would surpass member growth estimates for the third and fourth quarters and end the year with close to 2 million members. EarthLink said it expects to add 600,000 members in the second half of the year, far ahead of expectations. It was up 1 1/2, or 3%, at 48 1/2.

Internet Capital Group

(ICGE)

was one of the top performers after brokerage houses that underwrote its initial public offering initiated coverage of the stock. ICG was up 8 3/4, or 15%, at 62 1/4.

Lead underwriter

Merrill Lynch

initiated coverage with a near-term accumulate rating and a long-term buy rating.

Deutsche Banc. Alex Brown

initiated coverage with a buy rating. Merrill analyst Henry Blodget noted that he did not assign the stock the firm's top ratings because the stock has run up significantly since it went public Aug. 4. He has a two-year price target of 125 and wrote that "long-term, we regard ICGE as 'must own.' " Internet Capital is a holding company with ownership positions in 36 partner companies, most of which are focused on business-to-business e-commerce.

Also,

PaineWebber

initiated coverage of

Quotesmith.com

(QUOT) - Get Report

with a buy rating. PaineWebber was an underwriter on Quotesmith's IPO. It was off 1, or 8%, at 11 1/2.

Finally,

Goldman Sachs

initiated coverage of

1-800-Flowers.com

(FLWS) - Get Report

by putting it on its recommended list. And

Wit Capital

initiated coverage with a buy rating. Both Goldman and Wit were underwriters for the 1-800-Flowers.com IPO. It was up 3/4, or 4%, at 21 1/2.