Soft Price Data Briefly Ease Net Stocks' Rate Worries

The PPI came in below target and Net stocks have rallied.
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Rising interest rates have been a thorn in the side of Internet stocks during their three-month selloff, but this morning's

Producer Price Index

report reminded traders to smell the roses, too.

The PPI gained 0.2% in July, against a forecast of 0.3%. The core rate, which excludes the volatile food and energy sectors, was flat. Economists had expected a core gain of 0.1%. While not taking the

Federal Reserve

out of the picture as far as increasing interest rates, the report has temporarily allayed some concerns about inflation.

TheStreet.com Internet Sector

index was up 19.13, or 3.8%, at 525.65. Price action of Net bellwethers was telling the story.

Yahoo!

(YHOO)

was up 4 5/8, or 3.5%, at 133;

eBay

(EBAY) - Get Report

was up 4 1/8, or 4.5%, to 95 1/2,

Amazon.com

(AMZN) - Get Report

was 3 5/8, or 4%, higher at 95 3/8; and

America Online

(AOL)

was up 4 1/4, or 4.5%, at 97 1/4.

In his Weekly Web Report published this morning,

BancBoston Robertson Stephens

analyst Keith Benjamin wrote that he wonders "if this week's bounce was a head fake." But Benjamin noted that investors "should be less concerned with picking the bottom of the market and begin to accumulate those stocks whose fundamentals appear to be improving."

Benjamin wrote that to keep stock-picking "simple," he was "leaning toward companies with or near profitability." He cited Yahoo! as a stock that "may be the least controversial and will rebound first." He also said

Lycos

(LCOS)

could surprise next week and post a profit. Lycos reports fiscal fourth-quarter earnings after the close of trading on Aug. 17, and earnings are expected to be flat, according to

First Call

. Benjamin also singled out

CMGI

(CMGI)

, saying that while not immediately profitable, it provides another Internet proxy. In early trading, Lycos was up 2 3/8, or 7%, to 37 3/8 and CMGI was up 4 5/16, or 6%, at 81 1/4.

Benjamin also commented on Thursday's news that

AltaVista

would offer free Internet access for customers who agree to allow targeted advertising be placed in a Web window on its screen. This is seen as one of the key challenges to AOL's service. Benjamin expects that quality of content, service and access to be the keys -- and those are AOL's strengths.

"We continue to doubt that free access will hurt AOL. Lower prices have not attracted any noticeable number of members to switch habits, by our observation," he wrote. "While an interesting temporary marketing tool, we don't see advertising/commerce revenues alone as sufficient to sustain this model."

BancBoston e-broker analyst Scott Appleby also chimed in with an update on online brokerages. He wrote that July was the second-worst month of the year in terms of trading volume, but based on figures from

internetstocks.com's

Netdex, volume for the period Aug. 4-10 jumped 30% to 957 million shares, its highest point since early May. While not drawing any conclusions because August is still a vacation month, Appleby said the results were encouraging.