Internet stocks soared Wednesday on a huge rally in B2B stocks and surprising strength in Amazon.com. The broader market was dragged lower by drug, retail and oil stocks.
The ISDEX gained 20 to 825, and the Nasdaq rose 21 to 4103. The S&P 500 lost 7 to 1502, and the Dow fell 112 to 11,103. Volume rose to 815 million shares on the NYSE and 1.52 billion on the Nasdaq. Decliners held a slight lead on the NYSE, but advancers led 21 to 19 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.
CS First Boston made a broad bullish call on B2B stocks, and traders responded. Commerce One soared 10 9/16 to 62 15/16, breaking through 55 and 58 resistance. The stock’s last rally topped out at 70. Ariba
rose 7 3/16 to 151 11/16, i2
gained 8 25/32 to 166 13/16, VerticalNet
added 2 1/4 to 56 1/8, PurchasePro
soared 8 7/16 to 59 3/16, and FreeMarkets
gained 7 to 81 1/8, continuing a strong run.
But CS First Boston downgraded the Internet consulting services sector on concern about declining business and seasonal weakness. Viant lost 1 13/16 to 14 5/8, Cambridge Technology
dropped 1 11/16 to 6, Rare Medium
was off 1/4 to 10 1/2, and Modem Media
lost 13/16 to 10 3/8.
Amazon.com rose 3 3/8 to 43 on positive comments from Goldman Sachs, the latest brokerage firm to laud Amazon’s move into the French market. Goldman also said it sees some signs of improving execution at Amazon. Technical Note: Amazon.com has broken out of a falling wedge, a bullish sign, and could go as high as $60. However, another retracement to the wedge boundary, possibly as low as $31, is not out of the question. The stock’s downtrend appears broken, however.
Inktomi rose 7 1/16 to 126 1/4 on Buy ratings from Lehman Brothers and First Union Securities. For more on Inktomi, click here.
S1 lost 2 3/16 to 17 7/8, as investors sold on the news of a contract win from Yahoo
. Yahoo finally bounced on a CS First Boston Buy rating, adding 2 1/4 to 123 1/4.
Juniper Networks added 7 1/4 to 203 3/8 on news that it will be added to the Nasdaq 100 Sept. 7. Corning
rose 14 5/8 to 324 1/4, another new high, on bullish comments from Merrill Lynch.
Akamai gained 5 15/16 to 72 1/4 on an expanded alliance with PSINet
, off 3/16 to 17 9/16.
Liberate rose 3 7/8 to 28 5/16 after winning a contract from BellSouth.
InfoSpace continued its strong run, rising 5 5/16 to 37 1/4 on news of a deal with ALLTEL.
Some technical comments on the market: The Nasdaq made it above the magic 4100 level today, but the real resistance may lie in the large-cap Nasdaq 100, which turned back at 3984, just below its recent high of 3987. And the QQQ , the Nasdaq 100 tracking stock, turned back exactly at its recent high of 99 1/2. If the Nasdaq 100 can clear 4000 and the QQQ can clear 100, the techs may have a little room to run. It is a plus, though, that the Nasdaq closed above its 50% retracement level of 4087. It still faces a downtrend line here, however, and as we’ve pointed out before, both the Nasdaq and Nasdaq 100 are rising in bearish “wedge” formations, with lower boundaries at 4040 and 3900, respectively. The Nasdaq may also be forming a head-and-shoulders secon
dary top here, with two shoulders around 4100 and a head at 4289. The ISDEX is also forming a rising wedge here, and ran right up against the lower boundary of a previous broken rising wedge last week. That previous wedge, which is also the upper boundary of the ISDEX’s current rising wedge, is now around 850, which coincides with the index’s 50% retracement point. A break much below 800 on the ISDEX would break the rising wedge. Support on the ISDEX is at 693-700, 650 and 600.
We broke rising wedges on the S&P 500 and 100, the Dow, and the Semiconductor Index, so we have a set-up for at least a small decline here. The S&P 500 could find support at 1500 or in the 1480-1490 range, but the broken wedge does give the index potential downside to 1425. The Dow could find support at 11,000, but the more important level is 10,900, the upper boundary of the broken bearish diamond pattern. A move below that level could lead to a broader sell-off. To the upside, if the Dow can close above its April high of 11,287, it could have room to 11,400. We should point out that the appearance of all these rising wedges at once, invariably a bear market phenomenon, is an indication that the primary trend in this market may still be down.
Recession indicator update: The treasury yield curve has now been inverted for more than a month, and it seems to be a given at this point that short-term yields will remain above 10-year yields for two months, a phenomenon that has predicted a recession 86% of the time in the last 40 years. More importantly, the two-year/10-year inversion is at its steepest since 1980. It may sound hard to believe in an era of 5% GDP growth, but the U.S. economy may be headed for a significant slowdown.