Nortel Drags Tech Stocks Lower

A revenue miss by Nortel Networks overshadowed a strong report from, sending technology stocks sharply lower on Wednesday.

The ISDEX lost 24 to 626, and the Nasdaq dropped 123 to 3296. The S&P 500 lost 19 to 1379, and the Dow slipped 7 to 10,386. Volume surged to 600 million shares on the NYSE and 1.03 billion on the Nasdaq. Decliners led by 16 to 9 on the NYSE and 22 to 12 on the Nasdaq. The big economic reports for the week are tomorrow’s employment cost index and Friday’s GDP report. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site. surged 5 1/4 to 34 13/16 after beating estimates by 7 cents with a 25-cent loss. Revenues of $638 million trounced estimates of $600-$608 million. AskJeeves , up 1 1/8 to 13 1/4, also beat estimates, but announced the resignation of CFO Thomas Low. VerticalNet , down 6 1/4 to 26 3/8, beat estimates by 9 cents with a 20-cent loss.

But it was Nortel’s earnings report that tested the market’s mettle. The stock plummeted 17 3/16 to 46 1/8 after revenues came in at $7.3 billion, at the low end of the $7.3-$7.8 billion range of estimates, and the company forecast slower optical networking growth in 2001. JDS Uniphase , also strong in the optical space, dropped 22 9/16 to 72 1/2. JDSU reports earnings tomorrow.

CNET surged 3 3/16 to 28 7/8 after reporting earnings of 7 cents, 4 cents ahead of estimates. [email protected] , off 11/32 to 9 25/32, matched estimates, but guided 4th-quarter estimates lower.

InterNAP slipped 1 to 16 15/16 after beating estimates by 3 cents with a 35-cent loss. Click Commerce dropped 3 5/8 to 29 1/4 despite beating estimates by 4 cents with a 4-cent loss. InterWorld dropped 15/32 to 2 11/32 after missing estimates by 1 cent with a 41-cent loss. USinternetworking , off 3/4 to 2 7/8, beat by 2 cents with a 49-cent loss.

Rhythms , off 5/8 to 3 5/16, beat estimates by 22 cents with a $2.07 loss. Viant , down 1/4 to 6 1/4, beat estimates by 3 cents, but Razorfish missed by a penny.

Bluestone Software dropped 2 3/4 to 20 7/16 on news of a merger with Hewlett-Packard . fared better, soaring 2 23/32 to 6 5/32 on a $6 3/8 cash offer from Trilogy Software.

Some technical comments on the market: Note: We are now including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the e-mail newsletter version, try this link:

We said last night that Nortel’s miss was bad news for the market, and so far that has been the case. The Nasdaq is selling off on higher volume for the second straight day, a bad sign for a new rally. The Nasdaq struggled repeatedly with its 38% retracement level of 3494, its August bottom of 3521 and its October 1998 trendline. At the moment, the Nasdaq may also be breaking back below its September downtrend line at about 3300. Also in that chart, notice the gap at 3250; hopefully that level can provide some support. Also, possible support is 3175, where the index broke out of a

falling wedge. But more ominously, notice the potential bear flag forming in that chart that could signal a retest of 3000, and a possible move to the apex of that falling wedge at 2800. That falling wedge apex at 2800 also coincides with a line across the pre-1999 peaks, which is where the index took off last year.

The S&P 500 cannot close below its 1994 logarithmic trendline at about 1350 by more than 2%, or 1323. The S&P could be forming a bear pennant that could set up a retest of the 1300-1325 range; oddly, it could also be forming a bull pennant, that smaller down-sloping pattern. The ISDEX broke support at 650. Next support is the 560-600 range. The Dow failed again at its secondary downtrend line just above 10,400. The index looks better than the others, but it too could be forming a bear flag or pennant, setting up a possible retest of the lows.

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