Cisco Comments Short-circuit Rally

Comments by Cisco Systems that a slowdown in capital expenditures was affecting the company cut short a promising rally in technology and Internet stocks on Wednesday. Traders anxiously awaited Yahoo's earnings after the bell.

The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 6 to 342, and the Nasdaq climbed 15 to 2457, but both indexes were well off their earlier highs. The S&P 500 slipped 1 to 1299, and the Dow lost 50 to 10,522. Volume rose to 570 million shares on the NYSE and 1 billion on the Nasdaq. Advancers led by 15 to 11 on the NYSE, and 20 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.

It was a rare day on the ISDEX, internet.com's Internet Stock Index, which traded 2% higher while Cisco was its worst-performing stock, down 10% to 33 11/16. 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 said 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 slipped 3 3/4 to 113 7/16 in sympathy.

Broadcom , a Cisco supplier, slipped off its highs, but still traded up 5 15/16 to 102 15/16. Broadcom is also a big supplier to Motorola , which reports earnings after the bell tonight.

Yahoo slipped 1 1/8 to 29 ahead of its highly-anticipated earnings report due out after the bell tonight. For the first time, Yahoo's whisper number (12 cents) is lower than the official estimate (13 cents).

eBay surged 3 1/2 to 36 7/8 on a positive presentation by CEO Meg Whitman at the Morgan Stanley conference.

Interwoven surged 3 to 24 on a Wit SoundView Strong Buy rating. PurchasePro tacked on 3/16 to 15 7/16 on an ABN Amro Buy rating.

Priceline.com added 1/4 to 2 1/16 on news of a settlement with Expedia .

barnesandnoble.com slipped 3/8 to 2 1/32 on an earnings warning. ServiceWare plunged 2 to 1 1/2 on an earnings warning.

Evoke , up 5/32 to 1 29/32, preannounced better than expected results and announced a restructuring.

i2 Technologies , up 3 1/2 to 45 3/16, finally got a bounce after preannouncing better than expected revenues. Ariba rose 3/4 to 37 11/16, and Commerce One tacked on 11/16 to 19 15/16.

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

The Nasdaq filled its gap from yesterday at 2396 this morning before turning up, backing and filling action that remains constructive. Now with earnings season about to hit, we should get a better sense of near-term market direction. Yesterday's action gave the index upside potential to 2650, but so far buyers haven't shown much conviction.