RealTime IT News

Stocks Survive Cisco

Considering that Cisco Systems offered technology investors little in the way of good news, Wednesday's 2% drop in the Nasdaq could probably be characterized as a good day. Blue chips held up better after GE reaffirmed its profit outlook.

The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 8 to 266, and the Nasdaq fell 42 to 2156. The S&P 500 declined 5 to 1255, and the Dow slipped 16 to 10,866. Volume rose to 1.22 billion shares on the NYSE, but declined to 1.77 billion on the Nasdaq. Advancers led 15 to 14 on the NYSE, but decliners led 21 to 16 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.

Cisco Systems lost 1.32 to 19.06, giving back what it gained yesterday. The company topped lowered estimates by a penny with 3-cent earnings, but reiterated guidance of flat to down revenues for the July quarter. The company said a bottom is possible in the next 1-2 quarters, but warned that visibility remains low.

Communications chip stocks were hit hardest by Cisco's less than stellar outlook, on concern that inventory levels remain high. Applied Micro lost 2.53 to 25.81, PMC Sierra fell 4.10 to 40, Broadcom dropped 4.23 to 40.30, and Vitesse declined 3.40 to 32.95.

Investors got some good news from EMC , which rose 1 to 42 after saying it sees a firming in corporate IT budgets. Comverse Technology climbed 1.64 to 74.59 after saying it expects to meet or beat estimates.

Microsoft gave back 1.66 to 70.40 on concern that its new XP software, to be released Oct. 25, may not give the company as big a boost as hoped because of compatibility issues.

NVIDIA continued to give back after its recent strong run, off 4.06 to 83. The company has been hit by rumors that business may be a little soft.

WebMD fell .82 to 8.23 despite topping estimates and announcing an alliance with AOL. Aether Systems , off 1.35 to 15.60, beat estimates, but comments on pricing pressures hit the stock of Research In Motion , which dropped 3.24 to 31.23.

Applied Materials lost 1.60 to 51 after Morgan Stanley lowered estimates ahead of the company's May 15 earnings report, but said investors should buy into the sector by August.

Akamai lost .52 to 9.81 on a Bear Stearns Neutral rating.

Some technical comments on the market: Note: We include 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

Not a bad day in light of Cisco's less-than-stellar earnings report. Since the market is largely range-bound, we'll take a look at the bigger picture today. The Nasdaq and S&P 500 (first and second charts) could be forming a rounding top here. They also have left several gaps on the way up, but since the most recent gaps up were breakout gaps, those may not need to fill. That also makes the top of those gaps, at 1200 on the S&P and 2000 on the Nasdaq, important support. First strong support is 2089 on the Nasdaq and 1232-1240 on the S&P 500. Looking at one-year daily charts of the Nasdaq and S&P (third and fourth charts), we see that the Nasdaq's main September downtrend line has come down to about the 2220 level, and provided resistance yesterday. With the combined resistance of the January bottoms and September downtrend lines near the recent tops, that's a lot of resistance for the Nasdaq and S&P to overcome. A break of either boundary of the current trading range - 2000 and 2252 on the Nasdaq, and 1200 and 1300 on the S&P - should dictate near-term direction. The Dow also may be forming a rounding top (fifth chart). The Dow's next strong support is 10,600-10,725, and a close above 11,035 would be bullish. Finally, an old indicator: It used to be said that as goes General Motors , so goes the Dow. While the relevance of that indicator could be argued, it's interesting to note that GM has been unable to take out 57 resistance on this run-up. A possible barometer of consumer confidence, if nothing else.

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