Internet stocks gave back all of Monday’s gains on Tuesday, as an earnings miss from S1 Corp. and an earnings warning from 24/7 Media fueled investor concerns about the health of the sector.
The ISDEX fell 24 to 693, a critical support level, and the Nasdaq dropped 81 to 3685. But blue chips rose despite a dismal earnings forecast from Procter & Gamble. The S&P 500 added 7 to 1438 and the Dow rose 84 to 10,606. Volume declined to 920 million shares on the NYSE and 1.33 billion on the Nasdaq. Advancers led by 16 to 11 on the NYSE, but decliners led 23 to 16 on the Nasdaq. The purchasing manager’s survey for July came in unchanged at 51.8, ending a four-month decline, and holding above the important level of 50 that signals economic expansion. But the prices paid component came in higher than expected, raising mild inflation concerns. The big economic report for the week is Friday’s July employment data. For earnings reports, visit our earnings calendar and reported earnings.
S1 Corp. lost 28%, falling 7 1/8 to 18 5/16. The company reported a second-quarter loss of $2.82 that missed analysts’ estimates by 8 cents.
24/7 Media led Internet advertising stocks lower after announcing that 3rd quarter sales will be less than expected because Web-related companies are buying fewer ads. 24/7 lost 2 1/2 to 9 3/4, DoubleClick
fell 2 3/16 to 33 3/4, and Engage
declined 7/64 to 9.
Companies continued to report earnings after the bell on Tuesday.
Sapient reported second-quarter earnings of 23 cents a share, 3 cents better than estimates, and announced a 2-for-1 stock split. The stock declined 9 7/8 to 103 7/8 in regular trading and changed hands at 109 after hours. GoAmerica
beat estimates by a penny with a 22-cent loss. The stock lost 1 1/8 to 10 5/8 in regular trading and rose slightly after hours.
Click Commerce reported a loss of 1 cent a share, 4 cents better than estimates. The stock fell 1 3/4 to 29 11/16 in regular trading and changed hands at 30 after hours. Salon.com
beat estimates by a nickel with a 36-cent loss. The stock gained 1/8 to 1 1/2 but did not cross after hours. Viador
beat estimates by 3 cents with a 29-cent loss. The stock gained 7/16 to 11 1/16 in regular trading and did not change hands after hours.
A large bet that Cisco Systems will report unimpressive earnings next week didn’t help tech stocks during the day. Cisco declined 1 3/4 to 63 11/16 on news that someone had purchased 56,000 puts, or bets that the stock will fall, representing 5.6 million shares. The company reports earnings next Tuesday. Cisco also announced its latest acquisition, IPmobile, for $425 million.
Exodus and Digex
were both the subject of takeover rumors. Exodus gained 2 3/16 to 46 5/8, and Digex bolted 8 15/16 to 72. Digex
beat estimates by 2 cents after the bell on Monday with a 54-cent loss, and a bullish conference call also helped the stock.
Ariba slipped 2 13/16 to 113 1/8 despite news of an alliance with Lucent
. Technical note: Ariba, a leader in the ISDEX’s recent gains, barely maintained its uptrend during last week’s selling, piercing it on an intraday basis. Competitor Commerce One
, which experienced a failed breakout recently, is sitting right on its uptrend line at 40 3/8. One stock that did break its uptrend, Vignette
, continued to show weakness, slipping another 4 11/16 to 29 3/16. The stock bottomed at 23 in May.
Red Hat gained 1/4 to 19 on news of an alliance with Ericsson.
P
riceline.com gained 1 5/8 to 25 1/4 on news of $190 million in investments from Liberty Media and Paul Allen’s Vulcan Ventures. Technical note: The stock appeared to break down out of a descending triangle at 32 last week, and could have further downside ahead.
Stocks that released earnings after the bell Monday met with mixed results on Tuesday.
barnesandnoble.com fell 31/32 to 4 5/32 after missing estimates by 9 cents with a 27-cent loss. Several brokerage firms downgraded the stock.
Expedia blew away estimates with a fourth-quarter loss of 30 cents a share, 17 cents better than estimates. The gained 1/4 to 17 3/8 after trading as high as 19 7/8. internet.com
, parent of this Web site, beat estimates by 3 cents with second-quarter earnings of 3 cents a share. The stock rose 1 to 20.
Radware beat estimates by 3 cents with 7-cent earnings, but the stock slipped 1 1/32 to 31 1/32. Liquid Audio
beat estimates by a nickel with a 35-cent loss, but fell 2 1/2 to 6 3/4 on analyst downgrades. EDGAR Online
missed estimates by a penny with a second-quarter loss of 15 cents, but the stock gained 1/4 to 3 1/2.
Drugstore.com gained 5/8 to 5 9/16 on an 83-cent loss, 14 cents ahead of estimates, and news of $63 million in financing.
Lionbridge missed estimates by 16 cents with a 33-cent loss, but the stock rose 5/16 to 8 1/16 on Strong Buy reiterations by Prudential Securities and USB Piper Jaffray. Genuity
beat estimates by 3 cents with a 23-cent loss, and the stock gained 1/4 to 8 3/8.
Juno Online beat estimates by 12 cents with a $1.11 loss. The stock gained 5/32 to 9 7/32. For more on Juno’s broadband access deal with Time Warner announced yesterday, click here.
drkoop.com slid 3/32 to 1 1/16 on news that merger talks with closely-held MilleniumHealth had ended.
XCare.net dropped 1 23/32 to 3 7/32 after the company delayed its second quarter earnings release. E*Offering downgraded the stock to Hold from Buy.
Some technical comments on the market: The Nasdaq and S&P 500 may be forming bear flags or pennants here, potentially signaling that the next big move may be down. The rally so far has been unimpressive, with investors rotating out of blue chips and into tech stocks yesterday, and then doing the opposite today. The Dow and the S&P struggled today with 10,620 and 1440 resistance. The Nasdaq has run into resistance at the very bottom of its large consolidation from June and July; an awful lot of money that went into the market the last two months is now under water, giving the index a lot of overhead resistance here. And given the Nasdaq’s break of a rising wedge last week, the index has downside potential back to 3042 if it is unable to mount a more impressive advance. Critical support is 3550-3585. To the upside, resistance began around 3750-3766 yesterday. Next up is the 3820-3830 level, and then the 200-day moving average at 3875. We should note that we see no bottom here equivalent to the inverse head-and-shoulders that the Nasdaq formed in the 60-minute charts at the start of the rally that began in May. The ISDEX is back at our critical support of 693; we’ve been saying for days that a close below 692 would be a warning sign. To the upside, the ISDEX is likely to run into resistance at the lower boundary of the rising wedge it broke on Friday; that boundary is now around 730. The broken wedge gives the ISDEX potential to return to 560, its May low. To the upside, above 730 is 790 resistance. Above that, the ISDEX turned back recently at 840, just below its 50% retracement level of 845. The S&P 500 also broke a beari
sh rising wedge last week, and fell as low as 1414 on Friday. Critical support is 1390, the index’s October 1998 uptrend line. A break of that trendline could carry the index to 1170 or lower, so we do not want to violate that line. To the upside, the S&P is facing resistance here, in the 1435-1440 range, and then again in the 1450-1460 range. The Dow turned back Friday after testing the lower boundary of its bearish diamond pattern (10,464, but we’ll continue to use 10,200-10,300 because of strong support in that range and the requirement of a 3% break of a major pattern). A break of that line could carry the Dow as low as 8,500. The upper boundary of the Dow’s bearish diamond pattern is 11,000. Near-term resistance for the Dow is in the 10,600-10,675 area.
