A rare earnings miss and warning from bellwether Cisco Systems sent technology and Internet stocks sharply lower on Wednesday, but stocks bounced off their worst levels.
The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 16 to 368, and the Nasdaq dropped 56 to 2607, more than 50 points off its low. The S&P 500 lost 11 to 1340, and the Dow declined 10 to 10,946. Volume rose to 1.14 billion shares on the NYSE, and 2.05 billion on the Nasdaq. Advancers led 16 to 14 on the NYSE, but decliners led 22 to 14 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.
Cisco plunged 4 11/16 to 31 1/16 after missing estimates by a penny with 18 cent earnings. Analysts had already reduced estimates to 19 cents a share after two stealth warnings from the company last month. Cisco’s revenues came in $450 million lower than expected at $6.75 billion, and the company’s gross margins also missed estimates. Cisco also warned that the next two quarters will see flat to lower revenue growth, well below estimates. Juniper
fell 7 13/16 to 94 3/8, Redback
lost 1 5/16 to 41 3/8, and Sycamore
dropped 3 1/2 to 23 1/2.
Broadcom , a Cisco supplier, lost 9 7/8 to 82 5/8 after making cautious comments at a Bank of America Securities conference.
Aether Systems fell 7 1/16 to 36 9/16 despite beating revenue and loss estimates, but gross margins came in lower than expected.
CNET , down 15/16 to 14 15/16, matched estimates but warned that future results will be much lower than expected. Agency.com
, off 5/8 to 3 1/4, beat estimates, but also warned.
EarthWeb , up 1/2 to 6 1/8, beat estimates. MicroStrategy
dropped 3 9/16 to 13 3/8 after beating estimates, but top company officials announced plans to sell shares.
Viant lost 1/8 to 4 after missing estimates. Ashford.com
was unchanged at 3/4 after issuing an earnings warning.
InfoSpace surged 1 11/32 to 5 after the company announced a conference call for February 12 to discuss plans to return to profitability.
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The Nasdaq and Nasdaq 100 broke down out of their rising channels today (first and second charts), then retraced back to those broken boundary lines at the close. Unless the indexes can reclaim those broken lines, they could face more downside ahead. The Nasdaq pierced its broken September downtrend line – http://cache.wsrn.com/images/AHT/compx0207log.gif – but recovered to close well above that line. If that line breaks, there isn’t much in the way of support between there and Nasdaq 2300, where the Fed first cut rates a month ago. 2572, reached today, represented a 50% retracement of the 2251-2892 run-up; the next major Fibonacci level is 2496, the 61.8% retracement level. Lower than 2496 and the Nasdaq’s move down becomes a trend in its own right.
The S&P 500 may well provide critical support for the market. The lower rising channel boundary around 1325 could provide a cushion for the market.
The Dow continues to struggle at 11,000 resistance. A close above 11,007 would be bullish under Dow Theory, the oldest school of technical analysis, particularly if the Dow Transports can stay above 3000; the Trannies continue to hold above that level. But the 11,000 level has been one tough obstacle for the Industrials, reflecting its importance to the health of the market and the economy as a whole. To the downside, we expect that lower trendline at about 10,700 to hold, if the Dow gets that low.
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