Nets, Techs Lead The Rebound

Internet and technology stocks led the way higher on Friday as investors waded back into stocks after a relentless three-month sell-off.

The ISDEX rose 20 to 424, and the Nasdaq climbed 118 to 2716, wiping out yesterday’s loss. The S&P 500 gained 14 to 1329, and the Dow added 57 to 10,472. Volume declined to 575 million shares on the NYSE and 1 billion on the Nasdaq. Advancers led by 17 to 9 on the NYSE and 23 to 12 on the Nasdaq. The National Association of Purchasing Management survey was below 50 for the fourth straight month, indicating economic contraction. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Investors piled back into former leaders. i2 rose 6 to 102 1/2, Juniper surged 12 3/4 to 129, Broadcom rose 5 5/8 to 103 1/8, and Checkpoint gained 9 3/8 to 112.

Yahoo , off 1 1/4 to 38 3/8, was one of the few downside movers in the ISDEX, falling after Prudential lowered its price target from $155 to $90 to reflect market conditions while maintaining its Strong Buy rating.

BroadVision fell 2 21/32 to 19 31/32 on a CS First Boston downgrade based on slowing sequential license growth and product transition.

DoubleClick added 1/16 to 14 1/4 despite an SG Cowen comment that Internet advertising growth rates may decline from greater than 50% to 5-10%.

Digex surged 2 27/32 to 24 1/32 on rumors that shareholders are trying to break up the merger between beleaguered WorldCom and Intermedia , which has a controlling stake in Digex.

NaviSite rose 7/8 to 3 3/8 after parent CMGI expressed support for the company.

Cisco gained 2 15/16 to 50 13/16 after Bear Stearns and Morgan Stanley Dean Witter said concerns about Cisco returning excess inventory to manufacturers are unfounded.

SonicWall rose 2 1/2 to 19 on a deal with ALLTEL .

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

As we said yesterday, the Nasdaq reached our downside target of 2530, duplicating its 41% descent from 5132-3026 from its second peak at 4289. That’s the minimum downside target for the satisfactory completion of this bear leg, and a potential bottom. We should also note that yesterday’s low of 2523 is about 100 points below October 1999’s low, when new economy investors decided the Fed had no effect on new economy stocks. The old saying “Don’t Fight The Fed” would appear to be as relevant as ever. We’re still keeping an eye on the Philadelphia Semiconductor Index, which has downside potential to 400 if it cannot get back above 600 and stay there; it is currently at 569. Also, we are just entering earnings warning season, so a retest of the lows is not out of the question (a higher bottom would be nice for a change), but it’s also a seasonally positive month. Now it’s time to go back to the intraday charts to gauge the quality of the rally. The Nasdaq 100 broke out of a small rising wedge this morning, with downside potential to the opening gap at 2500, but the uptrend line from yesterday stemmed the selling at 2600.

The ISDEX continues to trade below its broken support line;

a break of that line at about 460-470 would be a real positive. The index has strong support at 375-400.

The S&P 500 got back above its broken support line at about 1315, but appears to be halted by a secondary line that might be the lower boundary of a broken bear flag. It’s a new month, so the 1994 log trendline will probably be at about 1388. To the downside, we want to hold 1300.

The Dow still looks bearish, despite its positive action the last couple of days, and could be forming a 400-600 point descending triangle. As long as the index stays above 10,380 on a closing basis, it looks okay. 10,300 provided support yesterday.

Special report: For a free introduction to technical chart patterns and an overview of this year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.

News Around the Web