Accounting, Consumer Confidence Rock Stocks

Stocks fell sharply Friday on accounting worries and an unexpected drop in consumer confidence.

The ISDEX fell 5 to 154, and the Nasdaq lost 38 to 1805. The S&P 500 dropped 12 to 1104, and the Dow lost 98 to 9903. Volume rose to 1.36 billion shares on the NYSE, but declined to 1.6 billion on the Nasdaq. Amazingly, advancers led by a few issues on the NYSE, but decliners led 20 to 14 on the Nasdaq.

IBM fell 5 points after the Wall Street Journal reported that the company did not disclose the $300 million sale of an optical business to JDSU when it reported better than expected fourth-quarter results in January.

NVIDIA fell 7% on news that the SEC is looking into the company’s recording of certain reserves and expenses. NVDA also blew away estimates and raised forward guidance. After the bell on Friday, credit concerns sent NVDA stock another point lower in after hours trading.

Dell fell 4% after matching estimates and reaffirming guidance.

SunGard slipped 3% despite beating estimates, but Analog Devices rose 3% after matching estimates.

Intel lost 3% after saying its earnings guidance hasn’t changed and it will update investors March 7. There are concerns that the company’s quarter may come in lower than expected because of pricing pressures.

Brocade fell 8% on news of a patent infringement suit by McData.

The one bright spot of the day was an Internet IPO: PayPal opened at 15.41, hit an intraday high of 22.44, and closed at 20.09.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

The Nasdaq’s (first chart) failed downtrend breakout yesterday was a bearish sign heading into today, and the index did not disappoint. The minimum downside target should be the recent lows at 1772, but 1720 looks likely from that chart. First resistance is 1815, then 1828-1832 and 1840. The Dow (second chart) and S&P (third chart) both put in evening star bearish reversal patterns today. Support on the Dow is 9880, 9800 and 9750, and resistance is 9925, 9950 and then 10,000. The S&P faces resistance at 1107, 1112 and 1117, and support is 1095-1098 and 1080. One good short-term sign today was a high closing put-call ratio, but it’s hard to get too excited by that with options volatility indexes at the low end of multi-year trading ranges. Two possible road maps for the weeks ahead: One is a decline into late February-early March and then a rally; and the other is a decline into late March/early April. We tend to favor the latter, given that Japanese banks will likely have to raise capital when they mark-to-market once again at the end of March. The last two occurrences contributed to big declines in September and March of last year. Throw in the potential for index futures losses approaching quarterly expiration, and it’s easy to see why those months have tended to produce good sell-offs.

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