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Yahoo Issues Major Earnings Warning

Yahoo plunged 20% in after hours trading on Wednesday after the company met earnings estimates, but issued a major profit warning for the rest of the year.

During the day, traders shook off comments by Cisco Systems that a slowdown in capital expenditures was hurting the company to send technology and Internet stocks higher.

The ISDEX http://www.wsrn.com/apps/ISDEX/ soared 22 to 358, and the Nasdaq surged 82 to 2524. The S&P 500 rose 12 to 1313, and the Dow added 31 to 10,604. Volume rose to 1.3 billion shares on the NYSE and 2.5 billion on the Nasdaq. Advancers led by 18 to 10 on the NYSE, and 25 to 12 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Yahoo plunged 6 points to 24 1/2 after meeting earnings estimates of 13 cents a share. Revenues for the quarter came in $4 million light at $311 million. But the company's outlook for the year was what really caught analysts by surprise: Yahoo said full-year earnings will come in at 33-43 cents a share due to economic weakness, well under analysts' 57-cent estimate. The company also guided full-year revenues down to $1.2-$1.3 billion from estimates of $1.4 billion.

During the day, Cisco lost 1 1/4 to 35 7/8 after CEO John Chambers admitted at a Morgan Stanley conference that the CapEx spending slowdown began to affect the company's business in mid-December, and that the company has less visibility than usual. Morgan Stanley and CIBC made negative comments on the stock. Morgan said the company's earnings could be impacted by 2 cents a share this year and 10 cents a share next year. CIBC said Cisco no longer has an appreciating stock price with which to make acquisitions, a big part of the company's strategy. Juniper Networks shook off weakness to rise 1 7/16 to 118 5/8.

Broadcom , a Cisco supplier, shook off the Cisco news to close up 13 3/16 to 110 3/16. Broadcom is also a big supplier to Motorola , which met earnings estimates after the bell.

eBay surged 5 15/16 to 39 5/16 on a positive presentation by CEO Meg Whitman at the Morgan Stanley conference. But the stock fell back to 36 after hours in sympathy with Yahoo.

Interwoven surged 4 3/4 to 25 3/4 on a Wit SoundView Strong Buy rating. PurchasePro tacked on 1/2 to 15 3/4 on an ABN Amro Buy rating.

Priceline.com added 5/16 to 2 1/8 on news of a settlement with Expedia .

barnesandnoble.com slipped 9/32 to 2 1/8 on an earnings warning. ServiceWare plunged 1 13/16 to 1 5/8 on an earnings warning.

Evoke , off 1/8 to 1 5/8, preannounced better than expected results and announced a restructuring.

i2 Technologies , up 6 3/16 to 47 7/8, finally got a bounce after preannouncing better than expected revenues. Ariba rose 2 15/16 to 39 7/8, and Commerce One surged 2 1/2 to 22.

Some technical comments on the market: Note: We are now including charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

A very strong day in the market; we'll have to wait until tomorrow to see if traders can take Yahoo's earnings warning in stride