Net Stocks Take a Beating After AT&T Squashes AOL Report

The already shaky sector sank after AT&T denied a proposal was under discussion with AOL over cable line access.
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A setback in America Online (AOL) and additional interest-rate concerns combined to punish Internet stocks late in the day.

TheStreet.com Internet Sector

index closed down 18.36, or 3.7%, at 480.03. Volume was light and likely contributed to the volatility.

The DOT began to slide about the same time as

AT&T

(T) - Get Report

denied that there was a proposal under discussion with AOL to allow it to use AT&T cable lines for high-speed Internet access. AOL ended the day up 3/4, or 1%, at 85 1/2, off its session high of 89 1/16.

Excite@Home

(ATHM) - Get Report

, which stands to lose the most if such a deal is reached, closed down 4 9/16, or 11%, at 38. Excite@Home is controlled by AT&T and a good portion of its valuation is based on having exclusive rights to the AT&T lines. AT&T finished down 13/16, or 2%, at 50 7/8.

Interest-rate concerns also played a role in weakness. Treasuries slipped amid ongoing worries that the

Federal Reserve

will raise interest rates when it meets Aug. 24 and that it may raise rates again in October if economic data remain strong. The 30-year bond showed its highest yield since November 1997, approaching the 6.25% level. With high valuations, Net stocks have been particularly sensitive to the recent increase in interest rates.

Financial stocks again took a hit.

TheStreet.com E-Finance

index closed down 3 5/8, or 6%, at 55 9/32.

Ameritrade

(AMTD) - Get Report

closed down 1 5/8, or 7%, at 20 3/8.

E*Trade

(EGRP)

ended down 1 13/16, or 7%, at 23 15/16 and

National Discount Brokerage

(NDB)

finished down 2 5/16, or 8%, at 26 3/4.

Sellers continued to hit the Net bellwethers.

eBay

(EBAY) - Get Report

, which has been beset by technical problems, closed down 3 5/8, or 4%, at 79 5/8 even as it met with analysts.

Yahoo!

(YHOO)

finished down 5 3/4, or 4.5%, at 121 3/16 and

Amazon.com

(AMZN) - Get Report

closed off 4 1/16, or 4.5%, at 85 1/2.

Also on the downside was

Network Solutions

(NSOL)

.

News.com

reported today that Network Solutions competitor

Register.com

was expected to announce partnerships with Internet service providers and other Net businesses to increase sales of Internet addresses. Network Solutions ended down 5 3/8, or 9%, at 54 1/8.

On the upside,

Net2Phone

(NTOP)

closed up 3 7/8, or 23%, at 20 3/8 after

Snap.com

agreed to market products from the Web telephony provider.

The Real Deal

RealNetworks

(RNWK) - Get Report

continued its aggressive push into the digital music market, introducing the

RealJukebox Plus

beta release of its new media software, which costs $29.95. The company also introduced the second version, or beta 2 release, of the free RealJukebox software.

RealNetworks claims that as of today there are more than 7 million unique users of RealJukebox worldwide, with an average of 70,000 new unique users added every day. RealNetworks estimates that more than 20 million CDs have been played or recorded by consumers using RealJukebox since its launch in May. RealNetworks also announced several partnerships on the marketing and hardware sides of the digital music equation. In the first deal,

Time Warner's

(TWX)

Warner Music Group

and Twec.com, the e-commerce site of U.S. music retailer

Trans World Entertainment

(TWMC) - Get Report

, agreed to jointly market Warner Music Group artists. Beginning later this month, the promotions will be broadcast via the beta 2 version of the RealJukebox and the RealJukebox Plus.

In the second deal, RealNetworks set a series of partnerships with the leading manufacturers of digital music players, including

RCA's Lyra

,

Diamond Multimedia's

(DIMD)

Rio

,

Creative Labs'

(CREAF)

Nomad

and

Philips'

(PHG) - Get Report

newly announced portable device. RealJukebox and RealJukebox Plus will now integrate drag-and-drop support for these devices, making it easier to transport and play digital music. RealNetworks closed up 5/8, or 1%, at 67 5/8.

-- Spencer Ante