An early rally in technology and Internet shares once again gave way under the weight of earnings warnings. Lexmark and Eastman Kodak were the latest firms to preannounce disappointing results.
The ISDEX slipped 2 to 791 after trading up 1.5%. The Nasdaq fell 18 to 3722 after trading up more than 50 points early on. The S&P 500 fell 5 to 1433, and the Dow dropped 130 to 10,677. More than half the Dow’s losses were due to a 20% drop in shares of Kodak
. Volume rose to 485 million shares on the NYSE and 810 million on the Nasdaq. Decliners led 13 to 12 on the NYSE and 22 to 13 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.
Better-than-expected earnings from Palm did little to help the negative mood in the market. Palm rose 2 11/16 to 54 15/16 after reporting earnings of 4 cents a share, 2 cents better than analysts expected.
Bellwether Cisco Systems slipped 3/16 to 57 after trading as high as 59 3/16 on better-than-expected earnings from Cabletron
.
eBay was one of the few bright spots, adding 2 1/8 to 74 1/2 on positive comments from Goldman Sachs. But Yahoo
slipped 2 15/16 to 102 9/16, hovering above its May and August bottoms of 99 1/2-99 3/4.
Entrust surged 3 11/16 to 26 1/2 on news of an alliance with Motorola
to develop next generation wireless solutions.
Phone.com gained 2 5/8 to 118 1/2, but off its intraday high of 121 1/2. Investors have been buying the stock since its announced merger with Software.com
was warmly received.
The IPO of CoSine Communications priced at 23, opened at 67, and traded down slightly to 65 13/16. Another recent IPO, OmniSky
, continued to draw buyers, rising 1 5/16 to 22 7/8.
Telescan lost 5/16 to 2 7/8 after GlobalNetFinancial.com
, off 3/16 to 7, terminated the companies’ merger agreement, saying the companies would do better to pursue their strategies separately.
NBC Internet gave back 1/4 to 7 3/8. ABN Amro began coverage with a Hold, saying the company will need time to realize benefits from its new strategy announced yesterday.
Wavo gained 5/32 to 27/32 on news of an XML-based content delivery deal with Dow Jones & Company.
Some technical comments on the market: Note: We will now be including charts with the technical market commentary; click on the link in the story below.
After turning back yesterday at the 38% retracement level (3859) of the 4259-3614 decline and the old broken uptrend line from May, a further decline in the Nasdaq today was not unexpected. So far, the sell-off has been halted at 3700, the old October 1998 trendline. Below that, critical support is the August bottom of 3521. To the upside is resistance around 3859. If the Nasdaq can get above 3913, it would both give the Nasdaq a higher high and place the index back above the broken trendline.
The S&P 500 turned back just below 1460 resistance yesterday and remains below its October 1998 trendline. A move above 1460 would be the first sign the index has room to run. To the downside, the critical support level on the S&P is 1420, where it turned up last week. That point is on a line with the March (1340) and April (1361) bottoms. The Dow closed back beneath the upper boundary of its old bearish diamond pattern around 10,825 yesterday, so follow-t
hrough selling is also not surprising on that index. Critical support is 10,500, the October 1998 trendline. To the upside, if the Dow can clear 10,900, the old economy stocks have room to run. The ISDEX is back in the 787-800 support range. Next strong support is the 750-760 area, and critical support is the May uptrend line at about 725. To the upside, first resistance on the ISDEXis around 800, and above that, two recent rallies have peaked around the 50% retracement level at 850.
Another word on complacency: The volatility index (VIX) peaked at 27 Friday morning and has traded around 24 since. The put-call ratio got as high as .62 on Friday and is now back around .50. Since significant market bottoms usually occur with the VIX above 30 and the put/call ratio above .90, the market may be just delaying a bottom here. The good news is that more bear markets end in October than begin in that legendary month, so it would probably be a long-term positive if the market were to put in a significant bottom next month. Otherwise, the psychology appears to be keeping this market range-bound.
