It was a bad trading session for all stocks, but Internet and technology shares in particular were hammered Wednesday as investors put an abrupt halt to a four-day rally.
Several serious earnings warnings and layoff announcements after Tuesday’s closing bell, notably from Palm and Nortel Networks, doomed trading from the start.
Leading the freefall were Internet stocks, with internet.com’s Internet Stock Index, or ISDEX, plummeting 10.1% to 205.87. One of the 50 ISDEX members is wireless handheld device maker Palm
, whose stock melted by 48.2% to $8.03 following the company’s warning of a revenue shortfall in the current quarter and an expected net loss of 8 cents per share.
The Nasdaq never got traction Wednesday, falling 118.13, or 6.0%, to 1854.13. The Dow Jones recovered some of its early losses in a late-afternoon rally, ending down 162.19, or 1.6%, to 9785.35. Shortly before noon the Dow was off 250 points. The S&P 500 dropped 28.92, or 2.45%, to 1153.25.
All 13 Internet sectors had far more losers than gainers, with 80% of ‘Net tickers declining overall. For all sector breakdowns, visit WSRN’s Internet sectors page.
It was ugly, indeed, and sobering for those investors who dared hope that a rally begun last Thursday was the start of a market comeback.
The catalyst for Palm’s painful showing — bloated inventory and softening consumer demand for handheld devices — also dragged down rival Handspring
, which fell 32.8% to $10.88. Two-way pager maker Research In Motion
lost 17.95% to $20.25.
Fiber-optic equipment maker Nortel Networks
, which on Tuesday forecast a wider-than-expected Q1 loss and lowered sales estimates, slid 16.5% to $14 per share. Nortel competitor Sonus Networks
fared even worse, skidding 20.4% to $23.
DSL equipment maker Elastic Networks
nosedived 40.3% to $1.56 after issuing a warning that Q1 revenues will be closer to $6 million than the originally expected $16 million. ELAS also exited its lockup period.
Web procurement software maker Ariba
shed 18.0% to $8.25 after picking up a less-than-nifty “neutral” rating from Pacific Growth Equities.
Here are technical comments from Paul Shread:
March 28, 4 p.m.: The Nasdaq and Nasdaq 100 fell back into their falling wedge
patterns today, a big disappointment, and could be headed for a bout with those
lower trendlines at about 1750 on the Nasdaq and 1550 on the Nasdaq 100 (first
and second charts). Interesting that the Nasdaq 100 is just about at its
previous low of 1590, while the Nasdaq is quite a ways from its recent low of
1794; it’s the big techs that are getting whacked here. The Dow and S&P 500, on
the other hand, look much stronger. Both formed three consecutive white
candlesticks, a pretty bullish development that should at least provide support
for those two indexes (third and fourth charts). For the Dow, support can be
found at 9600-9650, then 9400-9500, and important resistance is 9975. The S&P
should find support at 1140 and 1120, and key resistance is 1180. And finally,
the treasury yield curve inverted once again on the low end today, a negative
sign. Stocks have tracked the yield curve closely the last few days; today it’s
saying that the Fed still has more work to do.