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Nets Gain On Merger News

Internet shares gained on merger news Tuesday morning, while the broader market treaded water at the start of a two-day Federal Reserve meeting.

The ISDEX rose 7 to 719, while the Nasdaq declined 16 to 3895. The Dow gained 43 to 10,586, and the S&P 500 added 1 to 1456. Volume declined slightly, to 380 million shares on the NYSE and 583 million on the Nasdaq. Advancers led 15 to 10 on the NYSE, while decliners led 19 to 16 on the Nasdaq. 3Com will report earnings after the bell. The Federal Reserve meets today and tomorrow. Most analysts expect no change in interest rates and will be watching the Fed's statement for hints as to the future course of interest rates.

Merger Monday spilled over into Tuesday for Net issues.

Media Metrix will acquire Jupiter Communications on a marriage of Internet research firms. Jupiter shareholders will receive 0.946 MMXI shares per share of JPTR. Media Metrix declined 2 7/8 to 25 3/8 on the news, while shares of Jupiter gained 1/4 to 23 1/4.

Ariba fell 2 13/16 to 89 3/8 on news that it will acquire privately-held SupplierMarket.com for 6.3 million shares, apparently putting Ariba into competition with FreeMarkets , which fell 3 1/16 to 43 1/2, extending Monday's slide. CIBC World Markets and Banc of America reiterated Strong Buy ratings on Ariba.

Wireless Internet deals dominated the news.

GoAmerica gained bolted 3 13/32 to 18 15/16 on news of wireless Internet alliances with Hewlett-Packard and EDS .

Shares of Aether Systems gained 10 9/16 to 201 1/2 on news of an alliance with Microsoft to market Windows-based Pocket PCs powered by Aether's Enterprise ISP service. W.R. Hambrecht initiated coverage with a Buy rating and $275 price target.

Shares of InfoSpace gained 2 7/8 to 59 3/4 on a Merrill Lynch Buy reiteration after the company appointed Rand Rosenberg CFO. Merrill analyst Henry Blodgett reiterated his positive views on InfoSpace, saying the company is in the best position to become the operating system software for the wireless Internet.

Phone.com fell 1 1/2 to 72 1/2 despite a Strong Buy rating and $125 price target from W.R. Hambrecht. The firm believes Phone.com is the wireless carrier best positioned to profit from the growth of the wireless Internet.

Expedia climbed 1 1/4 to 16 1/2 after receiving $50 million in financing from Technology Crossover Ventures and $10 million from Microsoft, its parent company.

VerticalNet gained 1 1/8 to 37 15/16 on a W.R. Hambrecht Strong Buy rating and $60 price taget.

Some technical comments on the market: Range-bound once again, but with a Fed interest rate decision coming tomorrow and earnings season starting soon, we may not be that way for long. The indexes are winding up in tighter and tighter patterns. The Dow is bound by 10,670-10,750 to the upside and 10,375-10,400 to the downside, the boundaries of its bearish diamond pattern. The S&P 500 is bounded by its diamond pattern boundaries of 1480 and 1370; interestingly, its rallies are now running out of steam when the September futures hit the 1480 level. The primary patterns in play are all bearish: rising wedges on the S&P 500 and the Nasdaq have been broken to the downside, and both indices may be forming bearish flag patterns in the 60-minute charts, perhaps signaling another leg down. To the upside, the Nasdaq needs to negate the rising wedge by moving decisively back above 4000 and then taking out 4073 to negate the key reversal last Thursday. To the downside, major support is 3725 and 3600 (3583). The ISDEX managed to hold key support at 700 yesterday, a nice sign of strength considering all the leading issues that have come unde



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