Internet and technology stocks managed to finish well off their lows on Wednesday, but a stunning earnings warning from Gateway Computer after the bell sent Nasdaq futures plunging more than 150 points.
gained 4 to 413 after trading as low as 394 during the day, and the Nasdaq lost 28 to 2707, another 52-week low. The S&P 500 added 5 to 1341, and the Dow gained 121 to 10,629. Volume rose to 1.1 billion shares on the NYSE and 2.04 billion on the Nasdaq. Advancers led by 14 to 13 on the NYSE, but decliners led by 25 to 13 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.
Storage companies were battered ahead of Brocade’s
earnings report, which beat estimates. The stock was unchanged at 151 after falling 9 1/2 points during the day. EMC
fell 7 5/16 to 72 3/16, and Emulex
lost 10 1/2 to 107 1/2.
led the ISDEX to the upside, rising 3/8 to 1 7/16 despite issuing an earnings warning. The company said it would concentrate on its top 500 clients, and Robert W. Baird upgraded the stock and set a $4 price target.
was halted at 2 after Verizon
terminated its merger agreement with the firm, citing a deterioration in fundamentals. The stock reopened after hours at 3/4, down 1 1/4.
plummeted 6 5/8 to 10 1/2 on a Dain Rauscher Wessels downgrade to Buy from Strong Buy, saying that a scale back by U.S. and Korean broadband carriers could hurt the firm.
Communications chip companies rebounded. Broadcom
rose 6 5/8 to 91 11/16 on a Morgan Stanley Dean Witter Strong Buy rating. PMC-Sierra
gained 3 11/16 to 100 9/16.
dropped 11 1/2 to 72 1/2 after Alcatel
won a DWDM contract from Sprint
, a Ciena customer.
rose 2 7/16 to 26 11/16 on a Bear Stearns Buy rating, saying the sell-off in the stock has been overdone.
B2B stocks continued their free fall. Commerce One
lost 9/16 to 30 7/8 after testing 29 support, i2
dropped 13 5/16 to 88 3/8, and Ariba
fell 4 7/8 to 56 7/8. Ariba’s next strong support is 49.
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The Philadelphia Semiconductor Index (first chart) had a major breakdown yesterday, closing below the lower boundary (600) of a 200-point descending triangle by more than the required 2% (577). The SOX then reaffirmed that breakdown this morning when it turned back at 597. After the close, with Gateway and Altera warning, we began to see the reason for the technical breakdown. The descending triangle has been an unerringly accurate chart pattern in this sell-off, predicting huge declines in stocks like Priceline.com and Inktomi. This one gives the semis downside potential all the way to 400; not a pretty picture, and one that would likely take the Nasdaq to significantly lower lows, perhaps all the way to the 1990 logarithmic trendline at about 2400 (second chart), if not lower. A close above 625 would negate the SOX’s breakdown. The Nasdaq 100 turned back at 2670 this morning, the upper boundary of its falling wedge (third chart). The Nasdaq could find support in the 2530-2570 range, a level we a
re likely to see tomorrow.
The ISDEX continues to trade below its broken support line, leading us to believe that it may still have some downside ahead. Based on the size of the broken pattern, the ISDEX could have downside to 320-370. The index has strong support at 375-400. A move above 480 would be a real positive for Net stocks.
The S&P 500 has so far held its falling wedge breakout, which is around 1330 for today. However, failure to get back above its 1994 logarithmic trendline at 1369 continues to give the index a bearish posture. The S&P must hold that lower line at about 1315, or it is likely headed to 1200-1250.
The Dow looks good, moving above a 400-point descending triangle and apparently negating the bearish pattern. 10,380 continues to be critical support; a close below that level would set up a retest of 10,000. However, given the bearish patterns in the S&P and SOX, we’d be surprised to see the Dow escape the selling.
Special report: For a free introduction to technical chart patterns and an overview of this year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.