Nets, Techs Down 2%

Investors seemed determined to take technology and Internet stocks lower on Thursday, adding Applied Materials to the long list of companies whose shares have dropped despite better-than-expected earnings. The only positive was that the selling came on lower volume.

Rumors of renewed tension between Iraq and Kuwait caused a spike in oil prices, weighing on the broader market, and retailers were again weak. The ISDEX fell 15 to 726, and the Nasdaq lost 93 to 3759. The S&P 500 dropped 12 to 1460. The Dow rose a scant 2 points to 10,908. Volume declined to 941 million shares on the NYSE and 1.34 billion on the Nasdaq. Decliners led by 14 to 13 on the NYSE and 23 to 15 on the Nasdaq. The Producer Price Index will come out at 8:30 a.m. tomorrow; analysts expect a 0.1% increase in both the PPI and the core. For earnings reports, visit our earnings calendar and reported earnings.

After the bell on Thursday, Internet Capital Group reported a second quarter loss of 7 cents a share. No estimates were available. The stock lost 2 13/16 to 31 5/8 in regular trading and was down slightly after hours. Dell Computer beat estimates by a penny after the bell with 22-cent earnings, but missed the whisper number by a penny and traded lower after hours. For after hours quotes and news, visit our new after hours trading site.

News that Amazon.com had formed an alliance with Toysrus.com did little to boost Amazon’s stock, off 7/16 to 30 7/16. The two will launch a co-branded toy and video games store this fall, and a baby products store next year.

Phone.com continued to draw accolades for its merger with Software.com and new CEO Donald Listwin of Cisco, rising 11 3/8 to 102 1/2, closing above 99 1/2 resistance. For more on the deal, click here. But Cisco continued to give back after failing to penetrate 70 resistance yesterday, losing another 4 9/16 to 63 1/4.

Former highflyer K-Tel lost 3/4 to 1 1/16 on news that it will be delisted from the Nasdaq on August 14. eFax.com lost 6.75 cents to 31.25 cents on news that it will also be delisted. drkoop.com , which analysts said is also in danger of being delisted for failing to meet the $1 minimum share price, fell 1/8 to 11/16.

Accrue Software gained 4 to 24 3/4 on news that it will acquire Pilot Software. Terms were not disclosed. Clarent soared 7 1/2 to 39 1/2 on news that its merger with ACT Networks will go through.

Verio rose 3 5/8 to 57 1/8 on news that it had agreed to a temporary restraining order blocking access to Register.com’s database. RCOM fell 2 7/8 to 14 1/2. For more on the story, click here.

InterVoice gained 1/2 to 9 1/2 after announcing that it is evaluating what to do with warrants it owns to purchase 741,237 shares of recent IPO SpeechWorks at an exercise price of $2.05.

24/7 Media fell 1 3/4 to 9 1/2 after beating estimates by a penny with a 49-cent loss. First Analysis downgraded the stock to Accumulate from Strong Buy on concern that the company was too dependent on investments in Chinadotcom, Network Commerce and i3 Mobile.

High Speed Access gained 15/16 to 5 15/16 after beating estimates by 12 cents with a 49 cent loss and announcing a $75 million investment from Paul Allen’s Vulcan Ventu

res and Charter Communications. Healtheon/WebMD slipped 3/8 to 11 1/2 after beating estimates by 6 cents with a 28-cent loss. Bluefly lost 1/16 to 2 1/2 after beating estimates by 27 cents with a $1.12 loss. NetZero rose 5/32 to 5 9/32 after beating estimates by a nickel with a 25-cent loss.

Vignette gained 1 21/32 to 37 17/32 after announcing an alliance with Sun Microsystems .

Sapient continued to give back after a strong run-up, losing 12 15/16 to 124 9/16 after announcing the purchase of privately-held Human Code for 755,000 shares.

Sohu.com gained 15/32 to 6 5/32 on a Donaldson, Lufkin & Jenrette Buy rating and $11 price target.

B2B stocks managed to show some strength. Commerce One gained 13/16 to 48 1/4, but has been unable to close above its previous 52-53 breakout point. Ariba traded below its 135 breakout point, but recovered to gain 6 11/16 to 142. i2 gained 5 3/8 to 144 5/8; the stock faces resistance in the 148 1/2 to 150 area.

QXL.com lost 7/8 to 4 9/16 on a Chase H&Q downgrade to Underperform from Buy, based on weak revenues.

Interspeed gained 2 3/8 to 14 7/8 on news of a $100 million agreement to provide DSL routers to Australia’s Intelligent Public Network.

Some technical comments on the market: Technology and Internet shares look weak here, but today’s declining volume gives some hope that the pullback can be mild. Also providing some support is the Dow, which managed to end barely positive today. However, given yesterday’s down day, the Dow too may be undergoing distribution here. The Dow would provide a real boost for the whole market if it could close above 11,000, the upper boundary of its bearish diamond pattern. So far, the index has shown strong support at 10,900, and 10,850 is the next support below that. The lower boundary of the Dow’s bearish diamond pattern is about 10,450, 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. GE’s leadership here is a plus. The Nasdaq rolled over this morning, as we said it might. We are still waiting for a high-volume follow-through to last Thursday’s reversal on the Nasdaq, and yesterday’s reversal and today’s selling is a sign that the follow-through may not materialize. The failure to rally off Cisco’s earnings makes us wonder what it’s going to take to move tech stocks higher. First support on the index is 3696-3725. The break of rising wedges recently on the S&P, Nasdaq and the ISDEX gives us potential for a lot of downside if this rally fails. The Nasdaq’s break of its bearish rising wedge gives it potential downside to 3042. A break and close below 3500 would be a big warning sign. The selling ended last week right at the 62% retracement level (3521) of the move from 3042 to 4289. The decline was also halted by the Nasdaq’s October 1998 trendline. The ISDEX twice failed to penetrate the lower boundary (770) of its bearish rising wedge. That broken wedge gives the ISDEX potential downside to 560. Support levels on the ISDEX are 693-700, 650 and 600. Above 770 is 790 resistance, and above that, the ISDEX turned back recently at 840, just below its 50% retracement level of 845. The S&P 500 failed at 1480-1490 resistance, and formed a bearish engulfing pattern yesterday, a sign of a potential reversal back to the downside. Support can be found at 1450-1460 and 1434-1440. The S&P’s broken rising wedge gives it potential downside to 1361. Critical support is 1390, the index’s October 1998 uptrend line. A break of that trendline could carry the S&P to 1170 or lower, so we do not want to violate that line.

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