A tough day for technology and Internet stocks got even more interesting after the close, as the Lucent-Alcatel merger was called off and Sun Microsystems warned.
The ISDEX http://www.wsrn.com/apps/ISDEX/ plunged 18 to 263, and the Nasdaq fell 75 to 2175. The S&P 500 dropped 9 to 1267, but the Dow climbed 33 to 11,039, once again holding the important 11,000 level. Volume rose to 1.18 billion shares on the NYSE, and 1.6 billion on the Nasdaq. Decliners led 16 to 13 on the NYSE, and 24 to 13 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.
Lucent fell 1.08 to 8.32 during the day on word that the company’s merger with Alcatel
would be for less than expected (see this morning’s Morning Report at http://www.internetstockreport.com/column/article/0,1785,1661_774061,00.html). Both Lucent and Alcatel rose after the bell after the companies announced that the merger talks had been terminated, reportedly over issues of equality and autonomy for troubled Lucent.
Also after the close, Sun warned that earnings will be 2-4 cents a share, less than analysts’ estimates of 6 cents. The company declined to provide forward guidance. Goldman Sachs had downgraded the stock during the day ahead of the company’s mid-quarter update after the close.
During the day, stocks fell across the telecom equipment sector on concern about what the proposed Lucent deal meant for both valuations and competition in the sector. Juniper dropped 6.16 to 46, slicing through 50 support, Ciena
lost 3.67 to 56.67, Redback
dropped 2.16 to 13.55, Cisco
lost 1.88 to 20.17, and Tellabs
declined 1.30 to 37.38, but held 36 support.
Storage stocks were weak after Goldman Sachs downgraded EMC , which also announced layoffs. EMC lost 2.60 to 34.50, Network Appliance
fell 3.64 to 22.08, Netegrity
dropped 3.83 to 35.17, and Brocade
plunged 5.31 to 41.16.
RealNetworks dropped 2.47 to 10.62 on reports that AOL
may include Microsoft’s
Windows Media Player in its access software.
iBasis tacked on .23 to 3.99 on a deal with Openwave
. Akamai
rose .18 to 11.13 on several federal contract wins.
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Today wasn’t all negative, but it was certainly mixed at best. The Dow (first chart) held important 11,000 support, but it ended the day right at its main downtrend line. A clean break of 11,000 or 11,050 should determine near-term direction on the index. The S&P 500 (second chart) is back below its September downtrend line, but it held important 1265 support, the neckline of an inverted head-and-shoulders bottom. Levels to watch are 1254 to the downside and 1293 to the upside. The Nasdaq (third chart) is back below its January bottom at the important 2252 level, but is holding above its September downtrend line, which should be around 2150 o so tomorrow. 2200 is now first resistance. The bad news for techs is the weakness in the generals, the Nasdaq 100 (fourth chart), which never took out its January bottom (2087) and is well below its September downtrend line. Today was a potential cycle turn date, so we’ll see if the market can turn up tomorrow.
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.
