Nets, Techs Fall Again On Earnings Worries

It was a familiar story for many Net stocks on Thursday: Company beats estimates. Investors scouring the report find something they don’t like. Stock gets crushed.

Amazon.com and VerticalNet were just two of the stocks facing that scenario. Tech stocks also dropped, on earnings warnings from Nokia and WorldCom.

The ISDEX fell 31 to 740. The Nasdaq lost 117 to 3870, right at its 200-day moving average. The S&P 500 slipped 2 to 1449 after rising as much as 12 points in the first hour of trading. The Dow bucked the trend, rising 33 to 10,549 on strength in oil and financial shares, but was 90 points off its high. Volume rose to 560 million shares on the NYSE and 810 million on the Nasdaq. Decliners led by 13 to 12 on the NYSE and 26 to 9 on the Nasdaq. The second-quarter Employment Cost Index came in in line with estimates at a 1% gain, but Durable Orders for June came in at the highest level in 9 years. Second-quarter GDP will be reported tomorrow. For earnings reports, visit our earnings calendar and reported earnings.

Amazon.com fell 5 9/16 to 30 1/2 after reporting a second-quarter loss of 33 cents a share, 2 cents better than estimates. But revenues came in at $578 million, below estimates of $585 million. Analysts lined up to downgrade the stock, including the analyst most associated with the stock, Merrill Lynch’s Henry Blodget. He downgraded the stock from near-term Buy to near-term Accumulate.

InfoSpace announced that it is buying profitable Go2Net for 1.82 shares for each share of GNET. InfoSpace also announced a second-quarter loss of 1 cent per share, a nickel better than estimates. Investors voiced their disapproval, sending shares of Go2Net higher by only 1 13/16 to 62 3/8, and punishing InfoSpace, down 11 15/16 to 35 13/16.

VeriSign reported earnings of 7 cents a share, 9 cents better than estimates. But the stock fell 5 15/16 to 173 1/4.

VerticalNet reported earnings of 23 cents a share, 7 cents ahead of estimates. But the stock fell 7 1/8 to 49 5/8. Lehman Brothers reiterated Buy, but lowered its price target from $175 to $105 and raised its fiscal 2000 loss estimate by 8 cents to minus 84 cents.

JDS Uniphase reported earnings of 14 cents a share, 2 cents better than expected. The stock, which was added to the S&P 500 last night, was off 2 7/16 to 133 1/2. Sands Brothers lowered the stock from Buy to Neutral based on the earnings report and the stock’s recent run-up. The stock has been struggling to stay above its recent 130-131 breakout point.

WebMethods beat estimates by 3 cents with a 16-cent loss. But the stock fell 19 3/16 to 113 15/16. NBC Internet reported a loss of 81 cents, 4 cents better than forecasts. The stock lost 1 17/64 to 10 1/4.

Looksmart reported a second-quarter loss of 9 cents a share, 5 cents better than estimates. The stock rose 21/64 to 21 3/8. Covad beat estimates by 13 cents with an 86-cent loss, and the stock gained 1 1/4 to 18 15/16.

Software.com fell 9 1/8 to 110 1/2 despite beating estimates by 8 cents with 8-cent earnings. MicroStrategy missed by a penny with a loss of 54 cents. The stock dropped 7 3/16 to 22 13/16.

EarthLink beat estimates by 7 cents with a 29-cent loss, yet declined 1 1/8 to 13 9/16. Women.com reported in line with estimates at a 20-cent loss, and declined 11/16 to 3 5/8.

Register.com beat estimates by 2 cents with a 3-cent loss, but lost 3 1/8 to 27 5/8. Ramp Networks missed by 8 cents with a 33-cent loss, and the stock dropped 2 3/4 to 6

1/16. pcOrder.com reported a 13-cent loss, in line with estimates, and fell 2 1/8 to 5 7/8.

kforce.com fell 5/16 to 4 11/16 after dropping 20% yesterday on an earnings warning. Goldman Sachs downgraded the company to Outperform from Recommended List.

Axent Technologies gained 5 15/16 to 25 on news that it is being acquired by Symantec . The company also beat estimates by 3 cents with 6-cent earnings.

Corning regained 9 1/4 to 267 3/8 on news that it won’t be buying Nortel’s optical components business. The talks, which were reported on Monday, have ended.

EMusic.com gained 7/16 to 2 5/8 on news that a judge has ordered Napster to shut down its music-sharing site. Liquid Audio initially traded higher on the news, but drifted down 1/16 to 10 15/16.

Some technical comments on the market: As we said yesterday, the market is oversold and ready to bounce, but so far only the Dow and S&P 500 have managed any semblance of a bounce. The Nasdaq is right at its 200-day moving average, at around 3870. If it fails to hold here (the index traded as low as 3853 today), 3820-3830 should prove strong support. If the bulls can’t manage a rally there, next up are the critical support levels of 3700 and 3583; below that is a lot of air. The index has declined steadily since breaking its bearish wedge just under 4100 on Monday. That wedge began at 3042 in May, thus giving the index potential downside back to that level. The Nasdaq’s recent rally turned back right at the intersection of the bearish wedge’s upper boundary and the index’s highest downtrend line, touching on the April highs of 5132 and 5070 and the recent 4289 high. Watch that line for the first sign the tech bear may be over, or that a rally may be failing. The ISDEX is also forming a rising wedge, with the lower boundary at about 725; a break of that line could carry the ISDEX all the way back to 560, its May low. Below 725, 700 has proven strong support; a closing break of the index’s recent intraday low of 692 would be a warning sign. The index traded as low as 735 today. To the upside is 790 resistance. Above that, the ISDEX turned back recently at 840, just below its 50% retracement level of 845. If Net stocks can get past 850 resistance, they could go to 880. The S&P 500 also broke a bearish rising wedge on Monday, then on Tuesday rallied back to the lower boundary of the wedge before heading lower. That action would seem to confirm the bearish pattern, with potential downside to 1361, where the wedge began in May. The lower boundary of the broken wedge is now around 1480. Next support is around 1440 (the index traded as low as 1445 today), and 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. The Dow turned back today right at the lower boundary of the bearish diamond pattern (10,500, but we’ll continue to use 10,200-10,300 because of 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. The index’s recent rally ran out of steam at 10,875.

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