Futures Drop On Intel Warning

Nasdaq futures fell 2% Thursday night after Intel warned that revenues will fall 25% sequentially, capping a day in which technology and Internet stocks sold off on an earnings warning from Yahoo.

The market was torn by competing Federal Reserve rumors during the day. Some took two speeches by Fed officials to mean that the Fed may only cut interest rates by 25 basis points when it meets on March 20, while others claimed the Fed could cut rates tomorrow if February unemployment data is weak enough.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 16 to 266, and the Nasdaq lost 55 to 2168. The S&P 500 added 2 to 1264, and the Dow surged 128 to 10,858. Volume was unchanged at 1.12 billion shares on the NYSE, and 1.74 billion on the Nasdaq. Advancers led 16 to 13 on the NYSE, but decliners led 21 to 14 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.

Nasdaq futures dropped about 40 points after Intel warned that its numbers will be even worse than previously forecast. Intel fell 3 to 30 7/8 after hours. The news could make for a tough IPO for Loudcloud tomorrow, the latest venture of Netscape co-founder Marc Andreessen.

Yahoo fell 3 3/16 to 17 3/4 after warning that the company will post breakeven results this quarter, 5 cents below estimates. Revenue of $170-$180 million will miss estimates of $230 million, and the company also announced that CEO and Chairman Tim Koogle will step down as CEO. The company will conduct an outside search to find a new CEO, but Koogle will remain as chairman. Yahoo also announced a $500 million stock buyback program.

Firms relying on Internet advertising were hit on the news. DoubleClick lost 1 5/16 to 12, and RealNetworks lost 1 1/32 to 7 3/16. CNET lost 1 1/8 to 9 7/16, and internet.com , publisher of this Web site, slipped 3/4 to 6 3/16 after both firms guided revenue estimates lower.

AOL Time Warner lost .80 to 44.50 after analysts defended the company.

Ariba fell 1 13/16 to 13 9/16, a new low, after issuing cautious comments at the Merrill Lynch Internet Conference.

EMC dropped 3.72 to 37.28 on a Wit SoundView downgrade and comments that the could be losing market share in Europe to Hitachi.

TIBCO fell 31/32 to 9 29/32 on an earnings warning. webMethods dropped 3 3/4 to 28.

Art Technology plunged 6 3/16 to 19 7/8 on multiple downgrades.

Extreme Networks , off 1 3/16 to 20 1/8, continued to get battered on earnings concerns.

Copper Mountain lost 3/4 to 3 23/32 on news of 25% layoffs andf the resignations of top officials.

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 broke down out of a 50-point trading range at 2200 this morning, following through on two straight potential reversal days. But more importantly, the Nasdaq may have broken down out of a bear flag, with downside potential to about 1970, based on the size of the move preceding the formation of the flag (see first chart below). Critical support on

the index is 2071, the redrawn 1990 logarithmic trendline. The index also has two gaps to fill, at 2142 and 2117; they could fill tomorrow on the Intel warning. The Nasdaq remains above its February downtrend line (second chart), but has been unable to take out 2250 resistance, a downtrend line from September and the January lows (third chart).

The S&P 500 was once again unable to take out its February downtrend line (first chart), and is clinging to support that could also be the lower boundary of a bear flag (second chart), giving the index downside potential to 1200. If the futures are any indication, that pattern should break down at the open tomorrow. 1234-1240 is first support on the index (1241 would fill a gap), and 1214 is critical support. To the upside, the index pierced its September downtrend line at about 1265 this morning (third chart), but was unable to follow through to the upside. If the index can close above 1275, its early January low, it could be headed for 1335.

The Dow continues to gain after taking out both 10,650 and 10,700 resistance yesterday, and is looking very good. 10,900 is next resistance, and a close above 11,000 would be bullish, and could also drag the Nasdaq and S&P higher. To the downside, 10,600-10,700 should now be strong support, and then 10,450-10,500 is next support. A close below 10,292 could lead to a retest of the index’s lows in the 9600-9700 area, although 10,200 or so could also provide support. The Dow Transports finished back above 3000 today (2990), a good sign. As we’ve said, the heavy buying and breakouts in the cyclicals is a very positive development, but that confidence hasn’t spread to the Nasdaq yet.

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