Fed, Applied Materials Drag Stocks Lower

The prospect of a hawkish Federal Reserve in the face of a slowing economy weighed on stocks Thursday, as did a negative outlook from Applied Materials.

The ISDEX slipped 10 to 554, and the Nasdaq lost 45 to 3119. The S&P 500 declined 7 to 1382, and the Dow fell 28 to 10,679. Volume declined to 406 million shares on the NYSE and 662 million shares on the Nasdaq. Decliners led by 14 to 11 on the NYSE and 21 to 13 on the Nasdaq. The Consumer Price Index came in inline with estimates. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

MP3.com added another 1 3/4 to 7 15/16, doubling in two days after settling a copyright infringement suit with Universal Music Group.

Rumors that Nortel Networks continues to experience difficulties weighed on Internet infrastructure stocks. One rumor had Ciena , off 1/4 to 100 3/16, winning a major contract from Nortel. Juniper Networks lost 7 3/4 to 169 3/4; a close below 174 gives the stock downside potential to 120.

TheStreet.com , down 5/16 to 3 3/16, announced that it is laying off 20% of its workforce, or 20 staffers.

PSINet rose 15/32 to 2 9/32 on news that the company has retained Goldman Sachs to explore financial alternatives.

Aether Systems added 7/8 to 107 5/8 on a partnership with Euronet Worldwide .

NaviSite lost 7/8 to 7 3/8 on a Merrill Lynch downgrade. Parent company CMGI could sell the company, the firm said.

Xpedior rose 3/8 to 1 1/2 on an alliance with IBM.

BroadVision rose 1 13/16 to 34 11/16 on a Robinson Humphrey upgrade to Outperform from Neutral.

GoTo.com tacked on 1/8 to 14 7/8 on an alliance with AltaVista.

Art Technology rose 1 7/8 to 49 7/8 after withdrawing a 4.72 million share secondary offering due to market conditions.

divine interVentures lost 9/16 to 1 15/16 on news that portfolio company BeautyJungle.com will shut down.

Ariba , off 8 1/4 to 83, returned to its June breakout point three days after breaking support at 100. A close below 80 could give the stock downside to 49. Possible support points are 70 and 60.

Some technical comments on the market: Note: We are now including 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

The Nasdaq 100 is forming a 75-point rectangle a day after it broke its bearish pennant to the downside. A break below 3000 could carry the index to 2925, while a break of 3080 could carry the index to 3150. The broken pennant gives the index downside potential to the 2500-2750 range.

The ISDEX continues to form a potential broadening bottom. A break above the top line at 680 would mean a bottom is in, and give the index room to 850. A nice looking chart, but be on guard for a possible retest of that lower trendline.

We continue to watch the S&P 500’s 1994 logarithmic trendline at 1369. If we close below that line by more than 2%, or 1335, we may have seen the end of the bull market. The index has repeatedly come close to a major techni

cal breakdown over the last month or so, but has somehow escaped from the abyss each time. The bull is wobbly, but still standing.

The Dow continues to hold up well, consolidating above a small downtrend line broken two days ago. First major resistance is 10,850, the old diamond apex, and critical resistance is 11,000, where the index has failed five times. First support is 10,600, but the index will continue to have bullish leanings as long as it stays above 10,369.

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