Amazon Posts A Profit

Tuesday was a down day for stocks, but not for Amazon.com, which soared on its first-ever quarterly profit.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 5 to 173, and the Nasdaq lost 47 to 1882. The S&P 500 fell 8 to 1119, and the Dow dropped 58 to 9713. Volume declined to 1.31 billion shares on the NYSE, but rose 1.8 billion on the Nasdaq. Decliners led by 17 to 13 on the NYSE and 23 to 13 on the Nasdaq.

After the close, AOL unit Netscape filed suit against Microsoft for anti-trust damages.

Also after the close, Motorola , Computer Associates , Novellus , FreeMarkets , Vitesse , Storage Tech , and Emulex beat estimates. Applied Micro and Altera matched estimates, and Commerce One and EarthLink missed.

During the day, Amazon soared 24% after reporting a profit of 1 cent a share – in GAAP (generally accepted accounting principles) accounting, no less. The company also raised forward guidance, but Lehman analyst Holly Becker said to take profits.

Broadcom fell 10% on concern about its earnings, due out after the close tomorrow.

PeopleSoft fell 5% on accounting concerns.

Lucent was flat on better-than-expected results, but Ariba fell 12% despite beating estimates.

Red Hat fell 11% after AOL said it is not interested in acquiring the company.

Nokia , which reports Thursday before the close, fell 6% on a Morgan Stanley downgrade.

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

The market is sitting right on the brink here – below 9598 on the Dow and 1110 on the S&P 500, the bears will be in control. However, the market is also very oversold on a short-term basis and thus could bounce soon, maybe after one more small leg down. The Dow (first chart) held 9700 support (9691). Resistance on the Dow is 9750 and then 9830-9860. The S&P 500 (second chart) broke 1125 support, but is holding above the critical 1110-1114 area. First resistance is 1125 and then 1134-1136. The Dow and S&P look remarkably like broadening tops over the last couple of months. The Dow could have downside potential of 600-900 points on a break of 9691, and the S&P could fall 60 points or more on a break of 1114. The Nasdaq (third chart) has a great deal of support in the 1860-1880 area; below that, 1760-1800 is the next strong support. First resistance is 1920-1935, then 1960, 1980 and 2000. The first five days of January were positive, a good omen for 2002, but a second January indicator is looking bearish: the Dow and Nasdaq have both taken out their December lows, which historically has not been a good sign for the coming year’s performance. The S&P’s December low was 1114.

Special report: For a free introduction to technical chart patterns, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.