Internet stocks plunged on Monday, led lower by a huge earnings warning from eToys. Blue chips led the broader market higher on speculation that the Federal Reserve could come to the rescue as soon as tomorrow.
The ISDEX fell 32 to 410, and the Nasdaq declined 28 to 2624. The S&P 500 rose 10 to 1322 and the Dow soared 210 to 10,645 on a Wall Street Journal report that the Fed could move to an easing bias tomorrow and might even cut interest rates. The market had expected a change to a neutral bias from the Fed’s current tightening bias. Volume declined to 1.16 billion shares on the NYSE and 2.06 billion on the Nasdaq. Advancers led by 18 to 10 on the NYSE, but decliners led 24 to 16 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.
eToys plunged 25/32 to 1/4 after warning that revenues will come in at about half of analysts’ estimates. The company said it has enough cash to survive until March 31, and it retained Goldman Sachs to pursue strategic alternatives. Amazon.com
dropped 2 7/8 to 20 after Merrill Lynch analyst Henry Blodget said Amazon’s alliance with Toysrus.com appears to be stealing market share from eToys, but that online toy retailing may have less potential than analysts thought. Ashford.com
lost 17/32 to 1/2 after Goldman cut ratings on the e-tailing sector.
America Online plunged 6.72 to 42.24 on an earnings warning from merger partner Time Warner
.
Cisco dropped 5 3/64 to 43 1/8 on concern that an increase in reserves could mean that the company’s customers may have difficulty paying.
Goldman downgraded stocks across the Internet space, among them BroadVision , down 3 3/8 to 17, Blue Martini
, off 1 3/4 to 13 1/8, Covad
, down 9/32 to 1 7/8, Digital Island
, off 1 5/32 to 4 27/32, and Navisite
, down 5/8 to 2 15/16. DoubleClick
slipped 7/16 to 11 11/16 after being dropped from Goldman’s Recommended List. Goldman put the cash value of DoubleClick at $7.30 a share.
Handspring dropped 2 11/16 to 44 7/8 as its lock-up period expired.
Terayon Communications plunged 8 1/4 to 5 3/8 on an earnings warning.
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The market may be building in an easing bias or even a rate cut from the Federal Reserve tomorrow, so be careful if the Fed doesn’t at least lean toward an easing bias. Technology and Internet stocks continue to get battered, but positive signs continue to predominate: a much lower number of new lows, gaps filled, and potential higher lows. Of the main indexes, the Nasdaq and S&P 100 have the most promising looking patterns. The Nasdaq could be forming an ascending triangle, a bullish pattern, after the third touch of the lower trendline today. It may take some time to get back above 3000 for good, but it looks promising.
The S&P 100 has strong support around 685, and may be forming a triple bottom. Below that is 650 support. An opening gap today at 1312 on the S&P 500 may need to be filled at some point.
The ISDEX found support at
403 today, filling a gap at 406. 400 is strong support on the index, and if it holds that level, it too will form a higher low.
The Dow got back above 10,600, so it again has a bullish posture. The index could be forming an inverse head-and-shoulders, the latest pattern to predict a possible move above 11,000.
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