Net stocks recover after scare

Like yo-yos, Internet stocks rebounded today after big losses yesterday over fears that interest rates may be on the way up.

Some investors took the drop as a buying opportunity, and that pushed the markets up a notch. The tech-heavy Nasdaq rebounded 11 points, and the Dow climbed back 89 points early on, but both then lost gains, ending the day down 18.67.

Investors were focused yesterday on interest rate concerns, which reportedly were raised at the March 31 meeting of the policy-making Federal Open Market Committee. The Dow fell about 147 points, to 8,917.6, and the Nasdaq dropped nearly 49 points, to close the day at 1,820.

Amazon.com climbed more than 12 points, to close at 95.63, after the company posted a much smaller loss than expected and said it would acquire three Internet companies to help it expand into new markets.

CDnow gained nearly 20 percent; Lycos climbed almost 19 percent; and DoubleClick was up 7 percent.

Some of those gains follow a round of "buy" recommendations from Donaldson Lufkin & Jenrette analyst Jamie Kiggen.

The analyst initiated coverage with a "buy" on Amazon.com, DoubleClick, Yahoo, and Excite. DLJ put America Online on its "recommended" list.

Some investors may have welcomed the one-day sell-off, which seemed to temper the bullishness that had lifted stocks too far and too fast, said Peter Cardillo, director of research at Westfalia Investments.

"Not only the Fed wants to cool off the market, investors want it to cool off, too," he said.

Fed-watchers said high stock and real estate prices are one of the biggest concerns central bankers have about the current economic picture.

Though inflation remains low at about 1.4 percent year-over-year, the Fed fears wealth created by stock profits could drive up consumer spending and push growth to unsustainable levels.

Fed inflation fears also center on the historically low level of unemployment, which may begin to push labor costs higher and fuel wage inflation.

While many of the Internet stocks regained some of their losses, they are still leaps and bounds from their highs reached just weeks ago.

While Excite ended the day up almost 15 percent at 66.47, it is still more than 25 points lower than its high of 93.31; OnSale gained more than 6 percent, to close at 25.5, but is still down from its high of 36.

Reuters contributed to this report.