Stocks had a tough time trying to stay above water Thursday morning, as news of renewed tension between Iraq and Kuwait caused a spike in oil prices. Good earnings, this time from Applied Materials, again failed to impress tech investors.
The ISDEX fell 8 to 733, and the Nasdaq lost 49 to 3803. The S&P 500 lost 6 to 1466, but the Dow rose 6 to 10,912. Volume declined to 445 million shares on the NYSE and 583 million on the Nasdaq. Decliners led by 13 to 12 on the NYSE and 20 to 14 on the Nasdaq. Internet Capital Group and Dell Computer will report earnings tonight. For earnings reports, visit our earnings calendar and reported earnings.
News that Amazon.com had formed an alliance with Toysrus.com
did little to boost Amazon’s stocks, off 3/8 to 30 1/2. The two will launch a co-branded toy and video games store this fall, and a baby products store next year.
Phone.com continued to draw accolades for its merger with Software.com
and new CEO Donald Listwin of Cisco, rising 9 15/16 to 101 1/8, above 99 1/2 resistance. For more on the deal, click here. But Cisco
continued to give back after failing to penetrate 70 resistance yesterday, losing another 3 3/16 to 64 5/8.
Former highflyer K-Tel lost 25/32 to 1/32 on news that it will be delisted from the Nasdaq on August 14. eFax.com
lost 5 cents to 37.5 cents on news that it will also be delisted. drkoop.com
, which analysts said is also in danger of being delisted for failing to meet the $1 minimum share price, fell 1/8 to 11/16.
InterVoice gained 1 to 10 after announcing that it is evaluating what to do with warrants it owns to purchase 741,237 shares of recent IPO SpeechWorks
at an exercise price of $2.05.
24/7 Media slipped 1/2 to 10 3/4 after beating estimates by a penny with a 49-cent loss. High Speed Access
soared 1 15/32 to 6 15/32 after beating estimates by 12 cents with a 49 cent loss and announcing a $75 million investment from Paul Allen’s Vulcan Ventures and Charter Communications. Healtheon/WebMD
added 1/8 to 12 after beating estimates by 6 cents with a 28-cent loss. Bluefly
added 1/16 to 2 5/8 after beating estimates by 27 cents with a $1.12 loss. NetZero
rose 13/32 to 5 17/32 after beating estimates by a nickel with a 25-cent loss.
Vignette gained 2 1/4 to 38 1/8 after announcing an alliance with Sun Microsystems
.
Sapient continued to give back after a strong run-up, losing 11 to 126 1/2 after announcing the purchase of privately-held Human Code for 755,000 shares.
Sohu.com gained 17/32 to 6 7/32 on a Donaldson, Lufkin & Jenrette Buy rating and $11 price target.
B2B stocks managed to show some strength. Commerce One gained 2 3/16 to 49 5/8, but has been unable to close above its previous 52-53 breakout point. Ariba
traded below its 135 breakout point, but recovered to gain 6 3/16 to 141 1/2.
Some technical comments on the market: About the only index showing any strength here is the Dow, which would provide a real positive for the whole market if it could close above 11,000, the upper boundary of its bearish diamond pattern. So far, the index has shown strong support at 10,900, and 10,850 is the next support below that. The lower boundar
y of the Dow’s bearish diamond pattern is about 10,450, but we’ll continue to use 10,200-10,300 because of strong support in that range and the requirement of a 3% break of a major pattern. GE’s leadership here is a plus. The Nasdaq rolled over this morning, as we said it might. We are still waiting for a high-volume follow-through to last Thursday’s reversal on the Nasdaq, and yesterday’s reversal and today’s selling is a sign that the follow-through may not materialize. The failure to rally off Cisco’s earnings makes us wonder what it’s going to take to move tech stocks higher. First support on the index is 3696-3725. The break of rising wedges recently on the S&P, Nasdaq and the ISDEX gives us potential for a lot of downside if this rally fails. The Nasdaq’s break of its bearish rising wedge gives it potential downside to 3042. A break and close below 3500 would be a big warning sign. The selling ended last week right at the 62% retracement level (3521) of the move from 3042 to 4289. The decline was also halted by the Nasdaq’s October 1998 trendline. The ISDEX twice failed to penetrate the lower boundary (770) of its bearish rising wedge. That broken wedge gives the ISDEX potential downside to 560. Support levels on the ISDEX are 693-700, 650 and 600. Above 770 is 790 resistance, and above that, the ISDEX turned back recently at 840, just below its 50% retracement level of 845. The S&P 500 failed at 1480-1490 resistance, and formed a breaish engulfing pattern yesterday, a sign of a potential reversal back to the downside. Support can be found at 1450-1460 and 1434-1440. The S&P’s broken rising wedge gives it potential downside to 1361. Critical support is 1390, the index’s October 1998 uptrend line. A break of that trendline could carry the S&P to 1170 or lower, so we do not want to violate that line.
Recession indicator: Short-term treasury yields moved above 5-year yields yesterday, completing the yield curve inversion. Short-term yields have been above 10-year yields for two weeks; when that phenomenon has occurred for two straight months, it has predicted a recession within six months 86% of the time since 1960.
