Falling Consumer Confidence Rocks Stocks

An unexpected decline in consumer confidence sent stocks sharply lower on Tuesday, and negative analyst comments ahead of Sun Microsystems’ mid-quarter update on Wednesday didn’t help.

Tomorrow morning at 8:30 is the all-important revision to second-quarter GDP. Analysts expect the number to be revised to zero; a negative number could be a significant negative.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 6 to 167, and the Nasdaq dropped 47 to 1864. The S&P 500 declined 17 to 1161, and the Dow lost 160 to 10,222. Volume rose to 982 million shares on the NYSE, and 1.41 billion on the Nasdaq. Decliners led 18 to 12 on the NYSE, and 23 to 13 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

After the close, Comverse Technology slipped after matching lowered estimates and reaffirming forward guidance. But day sales outstanding rose to 117 as the company experienced difficulty collecting. Gateway rose on news of a restructuring and comments that it expects a sequential improvement in business.

Comverse spin-off Ulticom plunged 3.89 to 13.75, breaking critical support at 16, after the company matched estimates but lowered forward guidance.

Goldman Sachs lowered estimates on Sun Microsystems ahead of tomorrow’s analyst meeting. The stock lost .85 to 13.65.

[email protected]’s board will meet Thursday to attempt to restructure its debt.

Exodus rose .13 to 1.07 on buyout rumors.

Intel said it still expects a second-half uptick in sales, but the uptick in stocks on the news didn’t last long.

Openwave gave back strong gains on news that the company had hired former Cisco executive Kevin Kennedy as CEO, but the stock still finished up .19 to 16.50.

Cisco lost .85 to 17.15, falling back below its 50-day moving average.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

They said it couldn’t be done, but they’ve done it: the Nasdaq and S&P 500 (first and second charts) managed to fall back into the steep downtrends that they broke out of on Friday. Doesn’t bode well for second quarter GDP or Sun Micro’s mid-quarter update tomorrow – a failed breakout is a pretty reliable technical signal – but at least it won’t take much upside tomorrow to get back above those downtrend lines. The Nasdaq broke critical support at 1883 today, which means that the recent move up was probably not a trend in its own right, and the trend is now down again. We’ll use 1883 as key resistance, and 1817 is critical support. A move below that level would likely target 1770. The Nasdaq 100, which closed at 1526 today, must hold its 1990 trendline at 1468, or another bear market leg down becomes likely. The S&P 500 faces tough resistance at 1170, and critical support is 1153. The Dow (third chart) also broke back below its main downtrend line today. 10,120 is critical support, and 10,300 is key resistance. Today was a cycle turn date, and it looks like that turn may have been down.

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