What started out as a stagnant day for Internet issues turned around in the afternoon as a new round of buyers came in which led to strong gains across the sector. However, analysts cautioned that investors could still see volatility over the short term.
Influential Internet analyst Mary Meeker of Morgan Stanley Dean Witter, started off the session with a note to clients warning them to expect more dips over the short term. She said the lack of a compelling reason to buy Internet issues combined with an abundance of Internet initial public offerings will likely put pressure on the sector.
“It isn’t uncommon this time of year for prices of technology stocks to contract when catalysts are insufficient. Also, as the number of Internet initial public offerings has increased sharply, it seems the deal quality has declined markedly and we wouldn’t be surprised to see investor resistance,” she wrote.
After being down almost 2 points at mid-day, internet.com’s Internet Stock index leaped 30.47, or 6.42 percent, to 505.20, the Nasdaq Composite gained 45.36 to 2,426.26 and the Dow Jones industrial average climbed 171.07 to 10,702.16.
The Internet bellweather’s all posted strong gains Wednesday. eBay Inc. (EBAY) gained 10-3/8 to 174-5/16 after being as low as 151-7/16, Yahoo! Inc. (YHOO) added 13-15/16 to 140-7/8, off its lows of 120-1/2, Amazon.com Inc. (AMZN) jumped 9-3/8 to 120-15/16 after hitting 104-1/2 earlier.
Investors snapped up shares of DLJdirect (DIR), the online trading unit of Donaldson Lufkin Jenrette. Shares climbed 10-1/8 to 30-1/8 on their first day. DLJ sold 16 million shares at $20 each, raising $320 million.
Shares of other online brokers were mixed. E*Trade Group Inc. (EGRP) was off 5/16 to 44-3/4, National Discount Brokers Group Inc. (NDB) was up 7-3/8 to 47-1/2 and Siebert Financial Corp. (SIEB) ended up 1/2 to 26-3/4.
There was also a lot of enthusiasm for StarMedia Network Inc. (STRM). The company, which is often referred to as the America Online of Latin America, gained 11-1/16 to 26-1/16 on its first day. StarMedia sold 7 million shares at $15, raising $105 million.
Two other IPOs didn’t receive as warm a reception. Juno Online (JWEB), a provider of e-mail services and Internet access ended off 1-3/8 to 11-5/8. Juno sold 6.5 million shares at $13 Tuesday raising $84.5 million.
NetNation Communications Inc. (NNCI) gained 1-1/2 to 4-7/8. The company’s shares moved higher after the Internet Corp. for Assigned Names and Numbers certified the company to register domain names once testing of the system is complete in mid-summer.
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