Microsoft Blows Away Estimates

Microsoft blew away earnings and revenue estimates after the bell on Wednesday, capping a day in which stocks battled back from a steep plunge.

The ISDEX fell 11 to 607, but well off its low of 588, and the Nasdaq fell 42 to 3171 after plunging to a new yearly low of 3026. The S&P 500 was down 7 to 1342, well above its low of 1305, and the Dow lost 114 to 9975, 300 points off its low. Volume soared to a near-record 1.43 billion shares on the NYSE and 2.5 billion on the Nasdaq. Decliners led by 18 to 9 on the NYSE and 25 to 14 on the Nasdaq. The Consumer Price Index came in stronger than expected, fueling inflation concerns. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Microsoft rose slightly after hours after beating estimates by more than 10%. Also after the bell, Ariba beat estimates with a break-even quarter, but slumped to 119, 8 points below its close. America Online traded up slightly from its 46 close after beating 13-cent earnings estimates by a penny.

During the day, i2 , up 1 1/32 to 181 3/32, beat estimates by 2 cents with 12-cent earnings and declared a 2-for-1 stock split. PurchasePro also beat estimates, but the stock dropped 7 3/4 to 32 1/2 after a strong rally ahead of the report. Better-than-expected numbers from Intel and Sun also helped, but IBM led the early morning plunge on weaker-than-expected revenues.

Yahoo gained 3 9/16 to 52 1/2 after trading as low as 44 3/8. Amazon.com gained 2 7/8 to 24 13/16 after trading as low as 18.

DSL stocks had a rough day on an earnings miss from Covad , down 5 to 3 19/32, and an earnings warning from Copper Mountain , which plummeted 17 to 9 7/8.

SonicWall , down 5 1/8 to 12, beat estimates, but announced the acquisition of privately-held Phobos and also received a downgrade to Sell from Janney Montgomery Scott. RealNetworks , off 6 3/16 to 15 1/2, met estimates but sold off on Internet advertising concerns. Primus Knowledge rose 25/32 to 6 1/32 despite missing earnings estimates.

Entrust climbed 1 1/2 to 23 on better-than-expected earnings. CheckPoint Software surged 16 to 163 on blow-out earnings of 35 cents, 8 cents above estimates. Handspring soared 15 1/4 to 93 1/8 on another strong quarter.

Also beating estimates were Blue Martini , off 3 3/16 to 32 1/2, EarthWeb , off 7/8 to 8 3/4, Travelocity.com , up 1/8 to 11, Mercury Interactive , down 12 1/4 to 122 5/8, Foundry Networks , down 4 1/8 to 66 7/8, CyberSource , off 1 11/16 to 5 1/2, and Datalink , down 1 1/8 to 12 1/8.

Intraware rose 1 1/4 to 6 5/16 on news of a partnership with IBM . WebMD tacked on 1 5/16 to 10 15/16 on positive comments from Merrill Lynch.

Commerce One , which reports earnings tomorrow, lost 4 7/8 to 59 7/8.

Some technical comments on the market: Note: We are now including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

Some strong signs of a bottom turned a little negative this afternoon, as the Nasdaq failed to close on the plus side, so it did not complete its intraday reversal. However, a number of signs of a pretty significant bottom remain: Fear is sticking around this time; the put/call ratio closed at 1.01, not too far from its 5-year closing high of 1.11. Another big spike up in the volatility index, the VIX. And most importantly, significant positive divergences in favor of technology and Internet stocks. To sum them up, at least 4 or 5 technical indicators such as MACD made lower highs when the Nasdaq made a lower low this morning. Also, the Nasdaq and S&P set a higher closing low from last week while the Dow set a lower closing low. All very good signs, and hopefully Microsoft will continue the positive turn of events tomorrow.

The Nasdaq turned up today just about at its upper falling wedge boundary. A break above 3400 would take out the downtrend line, and give the index room to as high as 3800. Major resistance could be found at 3500, around the August 3521 bottom and the 38% Fibonacci level from the 4259 to 3026 decline. To the downside, the triple bottom around 3050 (3042, 3054 and 3026) is critical support. Absolutely critical.

The S&P 500 is back below its 1994 logarithmic trendline at about 1350, a very important level. The index reached a new intraday low of 1305, but is now back above 1325, its Februrary bottom. A close below 1323, or 2% below the 1994 trendline, would be a big negative. To the upside, the S&P’s downtrend line is around 1380; the index has turned back around 1380 a few times.

The ISDEX turned back today at its September downtrend line around 630. The index came close to testing its May low of 560 today. First support is 600, and next resistance after 650 is 700. The Dow completed the predicted down move out of a bear pennant today, and appeared to find support at its 1994 linear trendline. To the upside, the index needs to get back above 10,000 and then take out 10,200-10,300 resistance to have any room to run.

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