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JDS Uniphase, GDP Weigh On Stocks

A historic loss from JDS Uniphase and a weaker-than-expected GDP reading weighed on stocks on Friday.

The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 3 to 205, and the Nasdaq climbed 6 to 2029. The S&P 500 rose 2 to 1205, and the Dow lost 38 to 10,416. Volume declined to 1.02 billion shares on the NYSE, and 1.58 billion on the Nasdaq. Advancers led 17 to 13 on the NYSE, and 19 to 17 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.

Second quarter GDP came in at a 0.7% gain, less than the consensus of 1.2%.

VeriSign , up 7.32 to 54.49, Qualcomm , up 3.74 to 63.40, Veeco , up 3.09 to 39.20, and Advanced Fibre , up 3.91 to 26.29, all surged on better-than-expected results. But JDS Uniphase dropped .91 to 8.56 after recording a $50.6 billion loss, the largest in history, much of it a writedown of goodwill on stock-based acquisitions.

Cisco slipped .32 to 19.06 after announcing the acquisition of privately-held Allegro Systems, Cisco's first acquisition in some time. Rumors that Juniper won a contract from AT&T also weighed on Cisco.

Corvis rose .55 to 3.82 on news that the company's cash burn rate is slowing. But Art Technology plunged 1.02 to 2.50 on cash burn concerns.

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GE and the Philadelphia Semiconductor Index had good days today, hopeful indicators for the market, but Microsoft continues to look very weak. One potentially bullish sign: The Nasdaq 100 (first chart) could be forming a bullish falling wedge. A strong break above 1700 on the index would look pretty bullish here (a good proxy would be a move above 42.50 in the QQQ tracking stock). However, it will be very difficult to make much headway without Microsoft, which is more than 10% of the index, and given how bearish Microsoft looks, the bearish argument looks as compelling as the bullish argument here. The Nasdaq (second chart) is struggling at a critical resistance level: the downtrend line of a declining channel (the blue lines). A strong move above 2045 Monday would likely set up a test with the Nasdaq's main downtrend line at about 2080 (the black line). The 2000 level should now be support. The S&P 500 (third chart) couldn't quite take out 1207 resistance, and is threatening to form a new downtrend line here. The 1195 area is first support. The Dow (fourth chart) is struggling at 10,430-10,475 resistance. A move above that would set up a test of the index's main downtrend line at about 10,600. The index could be forming a potential bear flag (fifth chart), setting up a potential test of critical 9950 support on a break of 10,350. Short-term sentiment is becoming too bullish, which could make it tough to get much upside, and the commercial futures traders are once again short the Nasdaq 100 in record numbers, not a good sign for the bulls, because the smart money is not behind this advance.

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