Dow, Nasdaq Drop More Than 100 Points

Stocks rebounded off their lows on Friday, but the Dow and Nasdaq still finished with triple-digit losses. A strong September unemployment report and more earnings warnings from technology and Internet companies unsettled investors.

The ISDEX lost 29 to 674, and the Nasdaq fell 111 to 3361. The S&P 500 dropped 27 to 1408, and the Dow declined 128 to 10,596. Volume declined slightly to 1.1 billion shares on the NYSE and 1.8 billion on the Nasdaq. Decliners led by 19 to 8 on the NYSE and 28 to 10 on the Nasdaq. The economy added 252,000 jobs in August, above the 225,000 expected by analysts, and the unemployment rate dropped from 4.1% to 3.9%. Hourly wages came in better than expected at a 0.2% increase. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Amazon.com dropped 1 15/16 to 31 5/8 on a rare Sell rating from Janney Montgomery Scott. Technical note: Amazon undercut 31-32 support today, trading as low as 30 3/16. The stock’s low was 27 7/8 on July 31; a break below that low would be a real negative. As we mentioned recently, Amazon broke out of a falling wedge at about 35. That means the stock should have put in a bottom, but CMGI is an example that that’s not always the case: the stock broke out of a falling wedge at 38 in August, but gave a warning when it broke below its July 31 low of 33 1/2 on September 25.

CMGI slipped 5/8 to 20 7/8 after the company clarified its cash position and on news of insider buying. The stock traded as low as 18 5/16 before the news. The company is burning cash at a rate of $63 million a month, but it has $654 million in cash and $1.6 billion in securities. CMGI said it expects its burn rate to decrease substantially over the next six months.

VerticalNet dropped 6 9/16 to 22 after Wedbush Morgan retained its Hold rating, but cut its price target from $50 per share to $30.

DoubleClick gained 1 1/16 to 24 7/8 on a Reuters report that the company could weather the Internet advertising downturn better than its competitors.

Net2Phone lost 2 1/2 to 22 1/2 on margin concerns despite beating estimates by a penny with a 29-cent loss.

Earnings warnings continued right on into earnings season, which begins in earnest next week. Marimba , off 5 1/2 to 5 5/8, Razorfish , down 3 25/32 to 4 31/32, iManage , off 2 1/4 to 3 3/4, and Snowball.com , down 1/4 to 1, all fell on earnings warnings.

Yahoo dropped 3 3/4 to 80 15/16. The company, which has sold off on earnings concerns, reports its results on Tuesday.

Inktomi lost 10 3/4 to 91 1/4. The stock may be forming a descending triangle, similar to one that Priceline broke down out of at 32. A close below 87 would be a big negative for Inktomi.

Some technical comments on the market: Note: We are now including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

The Nasdaq pierced and closed below its critical support level, the October 1998 trendline at 3400. The Nasdaq 100 pierced its October 1998 trendline at 3300 but closed above it. The Dow also penetrated its October 1998 trendline at about 10,600 and closed right on it. The S&P 500 broke its February 2000 trendline (the gray line at about 1407) but closed above it. The Dow and S&P found support at around 10,500 and 1400, respectively. While the indexes’ recovery is encouraging, critical support was broken, and more downside could lie ahead. However, as we have pointed out in the past, more bear markets end in October than begin in that storied month, and this market is once again very oversold, so a sustainable recovery can hopefully begin soon.

The Nasdaq continues to form a falling wedge, a decline with converging boundary lines (also in the chart, notice the small bear flag, or upside consolidation, that was broken yesterday, signaling the sell-off that came today). Wedges tend to break about two-thirds through the pattern, which would place the break just about at the end of trading on Tuesday, just in time for Yahoo’s earnings report. Hopefully Yahoo won’t disappoint. Resistance in that chart is the upper wedge boundary at about 3450. A break above 3450 would be a sign that a bottom could be in place. The ISDEX is holding support above 650; below that, next support is 600, and then the May low of 560. To the upside is 700 resistance, and then the 735 level. The Dow needs to get through resistance in the 10,850-10,900 area, and the S&P 500 needs to clear 1460 to have room to run.

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