Loudcloud Cracks IPO Market, But Stocks Sink

On the first anniversary of the Nasdaq’s peak, Loudcloud managed to become the first Internet IPO of 2001, but it was otherwise a dreary day for stocks.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 16 to 249, and the Nasdaq plunged 115 to 2052, exceeding its 59% decline in the 1973-1974 bear market. The S&P 500 dropped 31 to 1233, a new closing low, and the Dow lost 213 to 10,644. Volume declined to 1.08 billion shares on the NYSE, and 1.99 billion on the Nasdaq. Decliners led 19 to 10 on the NYSE, and 26 to 9 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.

A stronger than expected job report raised concerns that the Federal Reserve might not cut interest rates as much as hoped. And the second earnings warning this quarter from Intel had traders wondering when technology earnings will begin to turn around.

Despite it all, Loudcloud , the latest venture of Netscape co-founder Marc Andreessen, was able to go public, pricing at 6, opening at 5 3/4, and closing at 6 5/32. It was a long cry from Netscape’s soaring IPO of August 1995, which marked the beginning of the Internet craze. The Nasdaq peaked a year ago at 5048 and has fallen 59.35% since then, a sharper decline than the Dow Jones Industrial Average experienced in the year after the crash of 1929.

eBay , one of the strongest of Net stocks, dropped 5 1/8 to 34 after Holly Becker, the Lehman Brothers analyst who downgraded Yahoo at 130 last August, questioned the company’s valuation of 119 times 2001 estimated earnings. Becker said eBay will have to blow away estimates to have much upside from here, and its limited desirability as a takeover candidate doesn’t give it much support to the downside.

i2 , off 1 15/16 to 19 1/2, upset the B2B space by acquiring privately held RightWorks for a song, about three times revenues. Analysts said the acquisition strikes at the core of Ariba’s business. Ariba dropped 2 1/8 to 11 1/2, a new low.

Amazon.com rose 9/16 to 12 1/4 despite a New York Times report that CEO Jeff Bezos was under investigation by the SEC for selling $12.2 million of AMZN stock after the company received an advance copy of a negative Lehman Brothers research report.

Cisco fell 2 1/16 to 20 3/4 on news that it plans to cut 5% of its workforce. After the close, CEO John Chambers said the company has no earnings visibility. Analysts have cut the company’s estimates by 10% in recent weeks, and they’re apparently still too high.

In a blast from the past, Lionbridge announced that it will buy Data Dimensions , a red-hot Y2K stock of a few years ago now trading for 19/32, up 5/32 on the news.

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’s descent out of a bear flag at 2200 yesterday (first chart) has been rapid indeed, sending it below critical support at 2070, the redrawn 1990 logarithmic trendline (not pictured; you’re probably as tired of looking at it as we are). If the index breaks that level by 2% on a closing basis (2028, also the July 1998 high pictured in the second chart), 2000 may provid

e some psychological support, but the next strong technical support isn’t until about 1800 (also in that second chart). A strict measurement of that bear flag’s pole gives the index downside potential to about 1950 on this move – which interestingly would fill all the gaps left from the October 1998-March 2000 advance. The index filled two gaps this morning, at 2142 and 2117, and also filled one at 2043 from mid-December 1998. To the upside, the new low in the Nasdaq lowers critical resistance to 2252, and 2100 is first resistance. Also, in the third chart, note that the Nasdaq has been trapped between two downtrend lines from September for some time now. And in the fourth chart, note that the Nasdaq 100 also closed below critical support – and is 300 points from its next strong support, the July 1998 highs just south of 1500.

The S&P 500 broke 1234 support today and set a new closing low, and could be headed for a retest of its low around 1215. 1190, the July 1998 high, is the next support after that. However, the index has now clearly established support in the 1228-1240 range. To the upside, the index must close above 1275, its early January low.

The Dow took out both 10,650 and 10,700 support this morning and formed a large bearish engulfing candlestick. 10,575-10,600 is the next support, which held today, and then 10,450-10,500. 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 are once again back below 3000, a negative. No place to hide today, and GE is breaking down too.

Special report: For a free introduction to technical chart patterns and an overview of last year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.

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