Stocks Battered On Intel Warning

Stocks dropped sharply Wednesday on a warning from Intel, but IBM topped estimates after the bell.

The Nasdaq plunged 50 to 1232, the S&P 500 lost 21 to 860, and the Dow fell 219 to 8036. Volume fell to 1.58 billion shares on the NYSE, and 1.58 billion on the Nasdaq. Decliners led 24 to 8 on the NYSE, and 20 to 13 on the Nasdaq. Downside volume was 84.5% on the NYSE, and 85% on the Nasdaq.

After the close, IBM erased all of its gains from the day and then some after beating estimates and reaffirming guidance. QLogic , Symantec , Sandisk , WebEx , Cerner , Extreme and Macromedia beat estimates, E*Trade matched estimates, but Apple Computer warned.

During the day, Intel plunged 18% after missing earnings estimates and warning.

Novellus , Motorola , RF Micro and DoubleClick fell on their earnings reports, but Internet Security and Advent rose on their reports.

Microsoft fell 3.6% ahead of its earnings report tomorrow night.

Sun fell 9% after its credit rating was cut.

Genesis Microchip gained 4.5% on rumors of a contract win.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

The Nasdaq and Nasdaq 100 (first two charts below) formed bearish island reversals and abandoned baby patterns today, but a big enough gap up tomorrow would throw those reversals into question; anywhere near yesterday’s opens of 1260 or 941 would do the trick. 1200 and 1220 are support on the Nasdaq, and 900 and 860 on the Nasdaq 100. The Dow (third chart) has support at 8000 and 7900, and resistance is 8277 and 8400. The S&P (fourth chart) has support at 840, and resistance at 877 and 895. The low volume in today’s pullback is a positive, and there’s one other interesting development: at 28.4%, Investors Intelligence bulls are at their lowest level since July 1994 (they hit 23.3% at the low in March 1994). There have been only 16 readings or so below 30 in the 40-year history of the survey, so it’s a plus that bulls have gotten that low (bears are at 43.2% currently). Remember that a sharp reversal to 45-31 bulls marked the August top, so sentiment appears to favor the bulls at present (another plus is yet another equity put-call ratio close above 1.0 today). Finally, the Dow Transports (fifth chart) never followed the Dow to new lows this year; under Dow Theory, that could be viewed as a bullish divergence. All in all, the first bottom in this entire bear market that we haven’t had a technical problem with. Here’s hoping it lasts for a while.






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