Intel Sinks Stocks

Intel’s disappointing guidance, asbestos concerns at 3M and a huge earnings miss by JP Morgan sent stocks sprawling on Wednesday.

The ISDEX dropped 10 to 175, and the Nasdaq fell 56 to 1944. The S&P 500 lost 18 to 1127, and the Dow plunged 211 to 9712. Volume rose to 1.4 billion shares on the NYSE, and 1.9 billion on the Nasdaq. Decliners led by 20 to 11 on the NYSE and 22 to 11 on the Nasdaq.

After the close, Yahoo beat estimates, as did AMD , Compaq , Symantec , Sonus , Redback , Extreme , Inktomi , Extended Systems and . Apple matched estimates, and Macromedia and Travelocity missed.

During the day, chip equipment makers Applied Materials , Novellus and KLA-Tencor lost 8-10% on Intel’s lowered CapEx guidance.

eBay fell 6% despite beating estimates. A tough online ad outlook and the company’s failure to raise guidance hurt the stock.

Juniper fell 5% after results hit the low end of estimates. RF Micro Devices fell 5% on a warning, and DoubleClick lost ground despite beating estimates. Handspring fell 15% after topping estimates but lowering forward guidance.

PeopleSoft lost 8% on earnings worries.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

This market must bounce in the next day or two or the bear is back. The selling has been heavy enough to allow for a bounce, as measured by the TRIN, and the Dow and S&P are just above very critical support levels. If the Dow and S&P (first and second charts) take out 9598 and 1110 to the downside, the first wave up off the September lows would be violated, which would be bearish under Elliott Wave theory. Also, the TRIN readings are high enough so that if a bounce doesn’t occur by Friday, the market could be in danger of crashing. It’s bounce or break time for the market. First support on the Dow is 9700, and resistance can be found just above 9800. The S&P has support at 1125 and 1124, and first resistance is 1134-1138. The Nasdaq 100 (third chart) broke down out of a head and shoulders top today, with downside potential to the low 1400s. If the breakdown is for real, 1590-1600 should cap any rally. The Nasdaq (fourth chart) also broke down out of a couple of trendlines that could now provide resistance in the 1980-1990 area. 1951, the 50-day moving average, is first resistance (could be at 1955 for tomorrow), and 1932, the 200 DMA, is critical support. Finally, a look at two sectors where money may be going: the HUI (fifth chart), the Amex Gold Bugs index, broke an 8-month downtrend today. If you’d bought gold mining stocks the last time we highlighted them in late November/early December, you’d be up 25%-50% at this point; however, the stocks are extended here, so it’s best to wait and see if the HUI holds that breakout. But stocks like Harmony , which we wrote about in August, have some of the most attractive – and improving – fundamentals in the market. Harmony trades at 8 times earnings that analysts expect will double in the next 18 months. Any increase in the price of gold will only add to those results. And the utilities (sixth chart) look like they may be putting in an inverse head-and-shoulders bottom here. Two utilities were among our top picks for 2002. It may be too late to get defensive on this market downleg, but gold miners and utilities appear to be promising longer-term sectors.

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