Earnings Concerns Weigh On Stocks

Earnings worries again weighed on stocks on Friday, as several technology stocks warned and Kulicke and Soffa hosted a disappointing conference call.

The ISDEX fell 21 to 800, while the Nasdaq lost 61 to 4037. The S&P 500 dropped 6 to 1496, and the Dow declined 46 to 11,213. Volume was unchanged at 435 million shares on the NYSE, but declined to 700 million on the Nasdaq. Decliners led 14 to 11 on the NYSE and 23 to 12 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.

National Discount Brokers issued a shocking earnings warning. The company said it would post a 6-9 cent loss because of difficult market conditions, instead of the 30-cent profit analysts expected. The stock plunged 9 to 26 13/16. E*Trade slipped 3/4 to 18 5/16, and Ameritrade lost 5/8 to 20 3/16.

Yahoo continued to fall on Internet advertising concerns, off 2 15/16 to 104. But the stock found support at 99 3/4, just above its July low of 99 1/2. DoubleClick slipped 1 9/16 to 34 11/16, and Engage lost 1 5/16 to 10 3/16.

CMGI continued to get a lukewarm reception to its reorganization plan, losing another 2 15/16 to 40 1/4. For more on the story, click here.

But the beleaguered Internet consultant sector found some takers on a William Blair & Co. upgrade of Scient , which soared 6 1/16 to 26 13/16. The firm said it expects Scient to make its numbers this quarter. Proxicom added 1 7/8 to 21 7/8, Sapient rose 3 3/4 to 51 5/8, and Viant tacked on 5/32 to 8 1/32 despite a Robertson Stephens downgrade.

Telecom equipment stocks were lower on a Wall Street Journal article that said the declining revenues faced by traditional telecom stocks could lead to a slowdown in equipment spending. Cisco lost 1 to 65 1/4, Juniper Networks was down 10 to 204 7/8, and Northern Telecom fell 3 5/8 to 73 3/8.

Aether Systems rose 4 to 148 on a Lehman Brothers Buy rating and $210 price target.

BroadVision gave back 1 7/16 to 36 1/2 after confirming rumors of an alliance with IBM. The stock had run up on the rumors yesterday. NaviSite gained 2 3/16 to 47 1/8 after announcing an alliance with Compaq and EMC.

OTG Software ran up 2 1/2 to 35 3/4 on a second day of positive analyst comments, this time from CS First Boston.

Commerce One gained 2 3/4 to 73 1/4 a day after closing above the important 70 level. The company is expected to announce additional contract wins in the near future.

Some technical comments on the market: The Dow broke its rising wedge to the downside this morning, so now all the major indexes have broken their uptrends that began a month ago. They all have downside potential to last month’s lows, but there are a number of important support points that could bring a halt to the selling before then. The Dow has so far held 11,200 support; 11,100 is next, then 11,000, and then the important support of 10,900, the upper boundary of the Dow’s bearish diamond pattern, which the index broke out of last month. The Nasdaq, S&P 500 and the ISDEX have already broken rising wedges to the downside, not a good sign in September, historically the weakest month of the year. However, it is encouraging that today’s selling is so far not occurrin

g on rising volume.

The Nasdaq is so far holding support around 4000, at its 200- and 50-day moving averages. Yesterday’s recovery came on lower volume, so today’s selling is not surprising. The Nasdaq struggled at 4100 resistance yesterday, the 38% retracement level (4106) of the move down from 4259 to 4013. We are hopeful that the sell-off on the Nasdaq and Nasdaq 100 can end at their downtrend lines broken two weeks ago. Those downtrend lines are now at about 3900 on the Nasdaq and 3750 on the Nasdaq 100. If the indexes can turn up there, it would be a positive sign. A break below those levels would likely lead to a wider sell-off. First support on the ISDEX is 790-800, which the index is holding today, but critical support is just above 700, which is now the intersection of the index’s March downtrend and May uptrend lines. To the upside, the ISDEX’s recent rally was capped by the 50% retracement level of 850. The S&P 500 is back below the important 1500 level. The boundary of its broken rising wedge is now around 1520 and climbing. To the downside, next support is in the 1480-1490 range; so far, the S&P has held at 1490. The index has met with strong resistance around its all-time closing high of 1527.

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