Amazon Leads Net Giants Lower

Internet leaders sold off on Friday on concerns about’s earnings and cash burn rate.

The ISDEX fell 24 to 720 and the Nasdaq declined 41 to 3895. The Dow rose 73 to 10,449 and the S&P 500 was unchanged at 1452. Decliners led 13 to 12 on the NYSE, where volume declined to 390 million shares. Decliners led 19 to 15 on the Nasdaq, where volume contracted to 660 million shares. Traders awaited the outcome of next week’s Federal Reserve meeting; most analysts think the Fed will stand pat.

It was a rare day on the ISDEX, with eBay and the worst-performing issues on the index.

Amazon fell 8 3/4 to 33 3/4, breaking key support at 40, after Morgan Stanley Dean Witter analyst Mary Meeker said the company’s revenues the next two quarters may come in weaker than expected. Lehman Brothers’ comments that investors avoid Amazon’s convertible bonds because of risk also hurt the stock, and Merrill Lynch comments weighed on the stock yesterday. The Lehman report said, “In its current situation of high debt load, high interest costs, spiraling inventory and rising expansion costs, we believe that current cash balances will last the company through the first quarter of 2001 under the best-case scenario.” The company isn’t expected to break even until the fourth quarter of 2001. A technical comment: Amazon’s long-term chart indicates that if the stock doesn’t hold $30, it could have downside to $22 or lower.

eBay fell 6 15/16 to 51 1/4 on a W.R. Hambrecht downgrade from Strong Buy to Buy, but the firm said eBay is still a core Internet holding. eBay was the subject of cautionary comments by Merrill Lynch recently, as was Yahoo! , down 6 1/16 to 125 5/8. Yahoo! turned back at 150 resistance recently.

Shares of fell 5 5/16 to 40 despite a Strong Buy rating by Thomas Weisel and an $85 price target. The firm said Priceline trades at a discount to other leading e-commerce companies, despite an enormous market and favorable margin trends.

Shares of PurchasePro gained 3 15/16 to 42 1/2 on news that CS First Boston expects the company to exceed estimates this quarter. Shares of Ariba rose 1 15/16 to 93 3/8 after finding support at 85 1/8, its recent breakout point.

Shares of America Online fell 2 to 54 1/2 ahead of a shareholders’ vote on the proposed merger with Time Warner .

Clarent rose 10 7/8 to 64 7/8 on a Lehman Brothers Buy rating and an alliance with

Shares of rose 1 1/4 to 7 15/16 a day after news that WebVan , up 7/16 to 8 9/16, would exceed estimates.

Sequoia Software continued to gain on news of an alliance with Microsoft , gaining 2 1/8 to 15 11/16.

Recent IPO Sonus Networks continued its run, up 1 1/4 to 155 but down from an intraday high of 169 15/16, after IPO co-manager Lehman Brothers began coverage with a Buy rating and $200 price target. Fiber optics stocks resumed their leadership. Corning gained 5 to 245 and SDL Inc. rose 5 1/32 to 272 13/32 after a two-day decline.

Some technical comments on the market: We’ve now broken rising wedges on both the Nasdaq (on an intraday basis) and S&P 500 (on a closing basis) to the downside, possible signs of a bear market rally running out of steam, and we could have a breakout failure on the Nasdaq by virtue of the fact that this morning we sold off back into our previous base, below 3893. If the Nasdaq closes below those levels, we must consider the possibility that we are still in a bear market and that the primary trend is still down. However, a word of caution: bear mar

ket rallies can be quite convincing, and shorts as well as longs can be wiped out. A rally back to the lower boundaries (3935-3950 Nasdaq, 1475-1480 S&P 500) of our rising wedges is a possibility; much higher than that and we need to reassess what’s going on. And our weak break of the Dow’s bearish diamond pattern at 10,382 has left room for a rally there; the top boundary of that pattern is above 10,750, quite a ways from here. As we said yesterday, the Dow diamond should not be considered definitely broken until we close below 10,070 on rising volume (3% beyond the boundary of the pattern); if we get that break, the downside target called for by the pattern would be 8,400 or lower. The ISDEX is approaching its pivot point; below 700, the balance for Net stocks tips to the downside. A break of 800 (790) would be bullish. And finally, for those of you who still believe in Dow Theory, the oldest school of technical analysis, the Transports’ chart has broken down and could be headed for a retest of the lows.

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