Wall Street's tough-love approach to Internet stocks didn't last long.
After a couple of days of trashing anything even remotely smelling like a Net play, investors reversed course Thursday and rushed to embrace all things .com. Sure, they might gripe about sky-high valuations, but if there's one thing traders fear even more than being burned by bloated Internet shares, it's missing out on the action when (or if) these suckers finally pay off.
The broader market posted impressive gains. The Dow Jones Industrial Average rose 186.15 points to close at 9363.46, and the Nasdaq Composite Index was up 95.99, or 4.16 percent, at 2405.49 -- the biggest one-day point gain ever. The S&P 500 advanced 30.48 to 1254.03.
Fed chief Alan Greenspan made an appearance on Capitol Hill, but confined his remarks to the need for banking reforms. While this provided a lift to financial stocks, traders seemed relieved that the Big Guy felt no need to pee all over the market's price levels, or to offer up cryptic hints as to interest rates. He did mention, though, that the US economy is "the envy of the world," which is probably true.
Investors thus found the confidence to focus once more on tech and Net stocks, and Wednesday's bargain hunting gave way to a full-on-the-lips buying spree.
"These stocks have gotten the crap beaten out of them," said Jeff Goverman, research director at Pacific Crest Securities. "They get to a certain level, and investors see an entry point.
"People can argue about valuations," he added, "but they won't argue about the future, and that's the Internet."
Enthusiasm for cyber-everything was rekindled as a trio of Net IPOs came rocketing out of the gate. Online service Prodigy Communications (PRGY) nearly doubled to US$28.13 after debuting with 8 million shares initially priced at $15 apiece. And Web-site operator VerticalNet (VERT) practically tripled in value to $45.38 after offering 3.5 million shares starting at $16 each.
Not to be outdone, online health-services provider Healtheon (HLTH) quadrupled to $31.38 after arriving with 5 million shares initially priced at $8 a throw. Healtheon's cachet is enhanced by founder Jim Clark, who co-founded Netscape Communications and Silicon Graphics.
Adding to the fun was Web-publisher CNET (CNET) climbing 42 percent to $129.50 after reporting that its fourth-quarter profit hit 18 cents a share, crushing the 10 cents expected by analysts. Sales for the company were up no less than 86 percent. CNET iced the cake by announcing a two-for-one stock split.
Lycos (LCOS) shareholders took heart that the portal's biggest investor, venture-fund outfit CMGI, said it won't vote for USA Networks' takeover of the company unless the terms of the deal are renegotiated to place a considerably higher premium on the stock's value. The current deal includes a scant 2 percent premium -- absurdly low for a top Internet firm, shareholders believe.
"Short-term, people were into the stock for a take-out," said Goverman. "Long-term, the merger remains an open book. Lycos knows it has to get bigger and become more of a media company."
That now may or may not happen with USA Networks' assistance. Lycos, soon-to-be parent of Wired News, rebounded 18 percent to $103.25 after losing nearly a third of its value over the past few days. CMGI (CMGI) was up 22 percent at $112, while USA (USAI) was only 75 cents higher at $40.
CMP Media (CMPX) vaulted 42 percent to $27 after saying it had hired investment banking firm Lazard Freres & Co. to explore the possibility of a sale or merger. The info-tech publisher also posted quarterly income of 20 cents a share, a penny more than anticipated.
SportsLine USA (SPLN) rose 15 percent to $40.13 as it extended its relationship with CBS for another five years, and announced that CBS had boosted its stake in the online sports service to 18 percent from 12.5 percent. Meanwhile, financial-news provider MarketWatch.com (MKTW) was $6.50 higher at $72 after saying its revenue and traffic were both up, even if the company lost 47 cents a share in the latest quarter.
Theglobe.com (TGLO) gained 17 percent to $52.44 after cutting a deal to offer sports news from Fox Sports Online. For its part, Fox Entertainment Group (FOX) was up $1.50 at $26.69 after reporting better-than-expected quarterly profit of 17 cents a share. It credited sales of the Titanic video with keeping its bottom line afloat.
MCI WorldCom (WCOM) advanced $4.19 to $80.44 after coming through with fourth-quarter profit of 23 cents a share, in line with estimates and a marked improvement over the company's year-ago loss of 18 cents. Separately, MCI said it was selling its Systemhouse consulting business to Electronic Data Systems for more than $1.6 billion, and arranging a number of other tie-ups with EDS valued at about $17 billion.
In tech, Sun Microsystems (SUNW) rose $7.88 to $105.31 on word that it had committed more than $1.2 billion to help America Online purchase Netscape. The value of the deal was originally $4.2 billion, but has increased with AOL's share price to the $7 billion range. Sun has agreed to market Netscape's business software.
Catalog-retailer Fingerhut (FHT) jumped 30 percent to $24.38 on news that it would be purchased by Federated Department Stores (FD) for about $1.7 billion. Investors were less sure of how Federated, owner of Bloomingdale's and Macy's, would benefit from the acquisition. Its stock slipped $2.81 to $39.69.
A federal judge may have ordered American Airlines pilots to return to work, but the carrier was still struggling to get its planes aloft as the pilots' sick-out continued. The pilots are protesting American's acquisition of budget airline Reno Air. American's parent company, AMR (AMR), shed 75 cents to $55.31.
American International Group (AIG), the largest US insurer, rose $7.75 to $106.50 after reporting fourth-quarter profit from operations of 94 cents a share, beating estimates by a penny. In other earnings news, Citation Computer Systems (CITA) jumped 65 percent to $2.69 after coming through with quarterly income of 5 cents a share, compared with a loss of 3 cents a year earlier.
Lastly, Philip Morris (MO) fell $1.06 to $40.38 after the world's biggest tobacco company was ordered to pay $51.5 million to a former three-pack-a-day smoker with lung cancer. Even if the verdict is reversed on appeal, which is possible, it's clear that the cigarette barons are finding it increasingly difficult to evade culpability for all the damage they do.
About time, too.
