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Stocks Fall On Cisco Earnings, Economic News

Stocks fell sharply Wednesday on a weak earnings report from Cisco and an unexpectedly weak reading of economic activity.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 9 to 196, and the Nasdaq dropped 61 to 1966. The S&P 500 lost 20 to 1183, and the Dow declined 165 to 10,293. Volume rose to 1.1 billion shares on the NYSE, and 1.6 billion on the Nasdaq. Decliners led 18 to 11 on the NYSE, and 24 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.

After the close, Wireless Facilities rose after beating estimates by a dime with 4-cent earnings and guided forward estimates higher.

Stocks were weathering Cisco's earnings report relatively well until the Fed Beige Book at 2 p.m. showed that growth remains flat or slowing in most regions.

Cisco dropped 1.29 to 17.97 after the company met estimates with 2-cent pro forma earnings, but revenues came in at the low end of estimates, and the company lowered forward guidance. Juniper lost 2.35 to 23.55, and Ciena fell 3.50 to 30.90.

Emulex dropped 2.20 to 23.49 on an earnings warning. But TMP Worldwide , parent of Monster.com, rose .89 to 50.30 after topping estimates.

Exodus surged .36 to 2.42 on news that the company may receive financing.

Sun Microsystems added .07 to 17.15 on an alliance with Hitachi.

Microsoft , down 1.35 to 65, held above critical 64.20 support. The company is appealing the antitrust case to the Supreme Court and may speed up release of Windows XP.

Bea Systems fell 2.76 to 19.79 after Prudential cut earnings estimates.

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So many negatives, it's hard to know where to start. The Dow (first two charts) broke critical support at 10,300, setting up a potential retest of the April lows around 9100-9400. The Philadelphia Semiconductor Index, which usually leads the market, took out its 50-day and 20-day moving averages today (third chart). The Nasdaq 100 (fourth chart) finally joined the Nasdaq (fifth chart) in a failed breakout. As one savvy trader said today, a failed breakout may well be the most reliable signal in technical analysis. They led to brutal declines twice earlier this year (remember the two Nortel warnings following breakouts in the Nasdaq?). The Nasdaq could find support around 1940, but a more likely target at this point is the lower black line in the 1850-1870 range, which would also complete the minimum downside target of the head-and-shoulders top that broke down in mid-June. 2000 should be tough resistance at this point. The S&P 500 (sixth chart) broke below 1190-1200 support, which is now resistance. The 1165-1170 area is next support. Since today was the last day of an important cycle turn window, it sure looks like the trend for the next two-to-three months is down, with a bottom coming in late October or early November. That seems like the more likely scenario than a crash, although the futures plunged so fast around 2 p.m. this afternoon that it briefly raised that possibility. The good news is the market is becoming short-term oversold, and could bounce in a day or two.

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