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NEW YORK (CBS.MW) -- Internet shares recharged Tuesday, scoring their biggest one-day gain this year, as signs the month-long presidential deadlock may be nearing an end helped spark a broad-based tech rally.
Soothing words from Fed Chairman Alan Greenspan, who spoke midday, helped to extend those gains.
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Updated:
12/5/2000 4:06:36 PM ET
The Goldman Sachs Internet Index rose 15.9 percent, the biggest one-day gain so far this year and the second biggest one-day gain ever behind a 16.97 percent surge on Jan. 11, 1999.
Merrill Lynch Internet Holdrs, a basket of the largest capitalized Net issues, ran up 12 percent. Net leader Yahoo (YHOO: news, msgs) strutted 16 percent to $43.88.
The Nasdaq Composite turned in its biggest one-day percentage jump ever, catapulting 274 points, or 10.5 percent, to 2,889. Robert Walberg predicted on Monday that the composite could reach 3,100 by the end of the year. See Net Sense.
The rally, however strong, was partly driven by investors who were frantically unwinding their short positions and chasing the stocks higher.
"There was definitely an election-relief bounce, and that probably forced the shorts to cover," said James Glickenhaus at Manhattan-based Glickenhaus & Co.
"But these stocks were oversold and they were cheap. And there are good buys out there," he added.
Some of those good buys were in the Net infrastructure sector as they saw the greatest demand in Tuesday's market action.
Merrill Lynch Infrastructure Holdrs shot up 24 percent. Leading Net infrastructure company Inktomi (INKT: news, msgs) surged 57 percent to $34.44. Inktomi was one of the hardest hit issues in November, declining 59 percent for the month.
Business-to-business stocks also benefited from the day's enthusiasm, as the sector played catch-up after taking a significant hit in November. Recall, the Goldman Sachs Internet Index lost 37 percent in the month, but Merrill Lynch B2B Holdrs, a basket of the largest business-to-business software and services companies, tumbled 49 percent.
Merrill Lynch B2B Holdrs rose 26 percent by the close. Shares of Ariba (ARBA: news, msgs) jumped 29 percent while Commerce One (CMRC: news, msgs) soared 30 percent. Art Technology Group (ARTG: news, msgs) catapulted 43 percent to $40.94.
Helping to pave the way for more cash to be put to use in the markets are the events in Washington.
The market is getting a psychological boost because it appears that a resolution to the presidential election is close, said Briefing.com's Walberg.
But a resolution-relief rally can only drive stock prices so far, even if a Republican wins the presidency. Conventional wisdom calls for the less-regulatory stance of a GOP-led White House to benefit the stock market. But whoever wins will have to govern from the center, given the divided Congress. Moreover, what happens in government might not be enough to spark the economy.
"A resolution isn't going to sell more personal computers," said Roy Howard, an analyst at Circle T Partners in Manhattan. But the Federal Reserve's actions will provide the economic relief to help revive sluggish sales across the board, Howard added.
Indeed, Federal Reserve Chairman Alan Greenspan's comments carried significant currency in the market. Greenspan, speaking on banking issues in New York, emphasized the economic slowdown, leading economists and analysts to believe that the Fed will ease interest rates sooner. See Market Snapshot.
Besides infrastructure names, stocks flying out of the gate Tuesday were shares of wireless application companies and optical networking companies.
Investors hope to take their chances in sectors that will help build the infrastructure of the Internet economy.
Wireless companies are expected to spark the next level of growth opportunities as more people access the Internet on handheld devices.
Aether Systems (AETH: news, msgs) gained 17 percent to $63.38. Merrill Lynch noted that the wireless technology company is down 40 percent in the past two months. The Merrill analyst Virginia Syer Genereux said that Aether will likely "exceed" her fourth-quarter revenue estimate and that there is upside potential to her '01 revenue projections.
Wireless application company AvantGo (AVGO: news, msgs) soared 50 percent to $9.19. Shares are still below their fall IPO price. InfoSpace (INSP: news, msgs) gained 27 percent.
Optical equipment companies are in demand on projections that high-speed access to the Internet will continue to grow. Avanex (AVNX: news, msgs), which makes photonic processors, saw shares jump 35 percent; New Focus (NUFO: news, msgs) rocketed 42 percent.
ONI Systems (ONIS: news, msgs) ran up 20 percent.
Past as prologue
If past is prologue, share prices will likely give back some gains in the days ahead.
As mentioned earlier, the Goldman Net Index jumped nearly 17 percent on Jan. 11, 1999, the biggest one-day gain ever.
On Jan. 12, 1999, the Goldman Net Index fell 6 percent, and subsequently lost ground for four straight sessions, losing nearly 17 percent in that period.
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