Priceline, Dell Weigh On Stocks

The stock market’s recovery ran into a stiff headwind on Thursday, as an earnings warning from Dell Computer and an announcement that Priceline.com will shut down its WebHouse Club operations sent stocks lower.

The ISDEX lost 17 to 704, and the Nasdaq fell 51 to 3471. The S&P 500 added 1 to 1436, but the Dow fell 60 to 10,724. Volume rose slightly to 1.17 billion shares on the NYSE, but fell to 1.85 billion on the Nasdaq. Decliners leading by 15 to 12 on the NYSE and 23 to 15 on the Nasdaq. The big economic report for the week is tomorrow’s unemployment report. Analysts expect a 225,000 increase in non-farm payrolls and a 4.1% unemployment rate. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Priceline cratered 3 19/32 to 5 25/32 after announcing it will shut down WebHouse, a privately-held licensee of the company that allows consumers to bid for gas and groceries. Analsyst took it as a sign that Priceline’s business model doesn’t work, and Salomon Smith Barney downgraded the stock to Neutral. Amazon.com , another company whose business model has been questioned, dropped 2 7/16 to 33 9/16.

Yahoo fell 3 1/4 to 84 11/16 after trading as high as 90 5/8. The company, which has sold off on earnings concerns, reports its results on Tuesday. Merrill Lynch said that the company’s cash flow provides a valuation advantage that investors should consider: the firm estimates Yahoo’s 2001 earnings at 80 cents a share, but free cash flow at $1.50-$2.00.

RSA Security surged 5 9/16 to 45 1/16 after announcing that earnings for the third quarter will be 24 cents, a penny better than estimates. The company also announced a 4 million share buyback.

The parade of earnings warnings continued. Breakaway Solutions dropped 2 15/16 to 4 9/16 after warning that it will post a 2-4 cent loss; analysts expected a penny loss. Harmonic Lightwave plummeted 9 13/16 to 13 on an earnings warning, and FreeShop slipped 5/16 to 3 1/8 after guiding estimates slightly lower.

America Online , up 2.50 to 61.15, continued to rise on comments from Merrill Lynch that the company’s merger with Time Warner should be approved by the end of the month. At 2001 estimates of at least $1.00, Merrill said the combined company’s valuation is attractive. Also, Time Warner and EMI put off their planned merger to win approval from the European Commission for the AOL deal.

i2 Technologies gained 10 1/8 to 169 1/2 on a Wit SoundView Strong Buy rating and $215 price target. But other B2B stocks were weak. Ariba fell 12 7/8 to 116 7/8, and Commerce One dropped 4 3/8 to 61 7/8.

VeriSign rose 9 3/4 to 193 5/16 on an expanded alliance with Motorola .

Internet Capital Group lost 3 3/16 to 12 1/2 on a Lehman Brothers downgrade to Neutral. Lehman said the company is unlikely to be able to bring more companies public until next year.

E.piphany rose 4 5/8 to 68 7/8, but down from an intraday high of 73 1/8, as the stock continued to rally on news of an alliance with Sun Microsystems .

Covad added 1 1/8 to 11 7/16 on a CE Unterberg Towbin Strong Buy rating and $47 price target. The firm said the current market environment is huttidn down competitors and there are signs of price stability.

EXFO fell 3 1/4

to 41 after trading as high as 48 after beating estimates by 2 cents with 8-cent-per-share earnings.

Some technical comments on the market: Note: We will now be 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: http://www.afterhourstrading.com/column.html

The Nasdaq once again is trying to form a falling wedge, a decline with converging boundary lines, a sign that the index is once more trying to put in a bottom (also in the chart, notice the small bear flag, or upside consolidation forming; it’s actually a small bearish sign, a consolidation slanting against the current trend. That pattern was broken to the downside this afternoon.). Resistance in that chart is the upper wedge boundary (about 3550) and the downtrend line from early September (3650). The first important Fibonacci level is 3715, the 38% retracement of the 4259-3382 decline. Critical support is the October 1998 trendline redrawn yesterday at 3400. A break of that line and the May low of 3042 might not be the final bottom. The ISDEX found support at 671 yesterday and recovered back above 700 support, which it held today. Next resistance is 735, where the ISDEX broke critical support on Monday, its May uptrend line, and then the 750-760 level. To the downside, first support is 700, then 650, 600, and then the May low of 560.

The Dow continues to hold above its broken downtrend line, now under 10,700. To the upside, important resistance is in the 10,850-10,900 area. If the index can get above 10,900, the cycle of lower highs will be broken and the old economy stocks could have room to run. To the downside, critical support is the October 1998 trendline at about 10,600 (also in the chart, note the gray lines, the bearish diamond pattern that could signal a market top). The S&P 500 is back above its April trendline at about 1425 (the middle line) after trading as low as 1416 yesterday, just above its late July low of 1414. To the upside, resistance can be found at the broken May trendline (upper line) at about 1470. Also note potential support (the gray line) just under 1410, the February trendline. Also, on the S&P’s hourly chart, note the index’s broken September downtrend line and the 40-point trading range (called a rectangle) the index is trapped in between 1420 and 1460; a break of that range could lead to as much as a 40-point move, the size of the consolidation. Also note the small bearish pennant that is currently forming, which is similar to a bear flag except that the boundary lines converge.

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