A brutal earnings warning from Nortel on the heels of one from JDS Uniphase pressured stocks on Friday.
The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 4 to 222, and the Nasdaq lost 15 to 2028, capping its worst week yet this year. The S&P 500 dropped 5 to 1214, and the Dow fell 66 to 10,623. Volume surged to 1.57 billion shares on the NYSE, and 2.01 billion on the Nasdaq. Decliners led 15 to 14 on the NYSE, and 21 to 16 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.
The Consumer Price Index came in tame, on the heels of yesterday’s mild PPI report, giving the Fed room to cut rates when it meets June 26-27. Merrill Lynch said the Fed could deliver another 50 basis point rate cut.
Nortel delivered one of the worst earnings warnings in memory before the bell, saying it will lose 48 cents a share for the quarter, 53 cents below estimates. S&P put the company on CreditWatch Negative, and the stock fell .74 to 9.86. JDS
lost 1.29 to 12.52 on its earnings warning.
CS First Boston reported that Cisco is discounting products and that U.S. business may not be improving. Cisco lost 1.09 to 16.65. Merrill Lynch cut estimates on Ciena
, down 4 to 40.67, and Tellabs
, off 1.20 to 24.51.
Adobe added .55 to 39.56 after topping estimates but providing vague forward guidance.
Check Point climbed .45 to 44.40 on news that the company’s alliance with Nokia
is intact.
Oracle climbed .15 to 15 ahead of its earnings report, due out after the close on Monday.
Microsoft , down .91 to 67.99, was hit by rumors that it might warn.
Commerce One dropped .75 to 3.96 on news that president Robert Kimmitt was leaving to join AOL.
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Just what we’d expect from a breakdown out of head-and-shoulders tops: volume increasing as the indexes fall away from the broken necklines. As we said this morning, the April breakout gaps at 1200 on the S&P 500 and 2000 on the Nasdaq were a good place to look for an oversold bounce, and those levels held today (see first two charts below). 2000 is also the current location of the Nasdaq’s old September downtrend line (third chart below), making it a doubly important support level. The market should begin a rally some time on Monday, Tuesday at the latest, but that bounce is likely to be capped at 1240-1250 on the S&P 500, 642 on the S&P 100, 2100 on the Nasdaq, 1770 on the Nasdaq 100, and 10,870 on the Dow; those are the necklines of the head-and-shoulders tops that broke down yesterday. If the indexes can clear those resistance levels, we’ll be pleasantly surprised. A close below 1200 on the S&P 500 and 2000 on the Nasdaq would just about cement the top. The Networking Index held its previous low today (fourth chart), but it looks like it might not hold it for long.
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