Nets, Techs Fall On Yahoo Warning

Yahoo ended the Nasdaq’s three-day string of rallying on earnings warnings on Thursday.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 15 to 266, and the Nasdaq lost 57 to 2166. The S&P 500 slipped 3 to 1258, and the Dow rose 33 to 10,762. Volume rose to 483 million shares on the NYSE, but declined to 787 million on the Nasdaq. Advancers led 15 to 13 on the NYSE, but decliners led 21 to 12 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.

Yahoo fell 3 15/16 to 17 after warning that the company will post breakeven results this quarter, 5 cents below estimates. Revenue of $170-$180 million will miss estimates of $230 million, and the company also announced that CEO and Chairman Tim Koogle will step down as CEO. The company will conduct an outside search to find a new CEO, but Koogle will remain as chairman. Yahoo also announced a $500 million stock buyback program.

Firms relying on Internet advertising were hit on the news. DoubleClick lost 3/4 to 12 9/16, and RealNetworks lost 1 1/16 to 7 5/32. CNET lost 1 23/32 to 8 27/32, and internet.com , publisher of this Web site, slipped 7/8 to 6 1/16 after both firms guided revenue estimates lower.

AOL Time Warner slipped .35 to 44.95 after analysts defended the company.

Ariba fell 1 3/4 to 13 5/8, a new low, after issuing cautious comments at the Merrill Lynch Internet Conference.

EMC dropped 3 to 38 on a Wit SoundView downgrade and comments that the could be losing market share in Europe to Hitachi.

TIBCO fell 1 to 9 7/8 on an earnings warning. webMethods dropped 3 3/4 to 28.

Art Technology plunged 6 9/16 to 19 1/2 on multiple downgrades.

Extreme Networks , off 1 1/4 to 20 1/16, continued to get battered on earnings concerns.

Copper Mountain lost 3/4 to 3 23/32 on news of 25% layoffs andf the resignations of top officials.

Some technical comments on the market: Note: We are now including charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

The Nasdaq broke down out of a 50-point trading range at 2200 this morning, following through on two straight potential reversal days. But more importantly, the Nasdaq may have broken down out of a bear flag, with downside potential to about 1970, based on the size of the move preceding the formation of the flag (see first chart below). Critical support on the index is 2071, the redrawn 1990 logarithmic trendline. The index also has two gaps to fill, at 2142 and 2117. The index remains above its February downtrend line (second chart), but has been unable to take out 2250 resistance, a downtrend line from September and the January lows (third chart).

The S&P 500 was once again unable to take out its February downtrend line (first chart), and is clinging to support that could also be the lower boundary of a bear flag (second chart), giving the index downside potential to 12

00. 1234-1240 is first support on the index, and 1214 is critical support. To the upside, the index pierced its September downtrend line at about 1265 this morning (third chart), but was unable to follow through. If the index can close above 1275, its early January low, it could be headed for 1335.

The Dow continues to gain after taking out both 10,650 and 10,700 resistance yesterday, and is looking very good. 10,800-10,900 is next resistance, and a close above 11,000 would be bullish and could drag the Nasdaq and S&P higher. To the downside, 10,600-10,700 should now be strong support, and then 10,450-10,500 is next support. A close below 10,292 could lead to a retest of the index’s lows in the 9600-9700 area, although 10,200 or so could also provide support. The Dow Transports finished are back above 3000 today (2990), a good sign.

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