Internet and semiconductor shares led the market sharply lower on Wednesday, as investors remained unimpressed by even better than expected earnings reports.
The ISDEX fell 28 to 756 and the Nasdaq dropped 87 to 3942. The S&P declined 15 to 1458, and the Dow dropped 117 to 10,582, negating its recent breakout. Volume rose to 495 million shares on the NYSE and 710 million on the Nasdaq. Chip stocks were down 7%. Advancers led by 14 to 10 on the NYSE and 26 to 10 on the Nasdaq. The major economic reports for the week are the second-quarter Employment Cost Index tomorrow and the GDP on Friday. Among the companies reporting earnings after the close today are Amazon.com, JDS Uniphase, InfoSpace, VeriSign and VerticalNet. For earnings reports, visit our earnings calendar and reported earnings.
Amazon.com received a negative earnings preview from Lehman Brothers, which downgraded the stock from Buy to Neutral. Lehman cited softness in key consumer metrics, substantial execution risks, and expensive valuation. Amazon fell 2 7/8 to 34 3/4.
eBay fell 4 5/8 to 51 5/8 despite reporting earnings of 5 cents a share, 2 cents better than expected, and revenues that nearly doubled to $97.4 million.
Vignette beat estimates by a penny with 1-cent earnings, but the stock dropped 6 7/8 to 36 3/4. ING Barings downgraded the stock to Buy from Strong Buy based on competitive concerns potential dependence on large deals.
AskJeeves was one of the few standouts, rising 2 1/2 to 19 1/2 after beating estimates by 4 cents with a 51-cent loss. First Union upgraded the firm to Strong Buy from Buy.
Marimba rose 1 to 23 1/16 after reporting earnings of 6 cents a share, 7 cents better than estimates. John Olsen of Cadence Design Systems was named president and CEO, replacing company co-founder Kim Polese, who is becoming chairman and chief strategy officer.
Art Technology Group fell 4 9/32 to 98 31/32 after trading as high as 116. The company reported earnings of 4 cents a share, 7 cents better than estimates.
MarketWatch.com fell 3/16 to 17 after beating estimates by 12 cents with a 64-cent loss.
Modem Media fell 2 5/8 to 12 3/4 after reporting a second-quarter loss of 7 cents, 6 cents better than estimates. Robertson Stephens downgraded the stock to Buy from Strong Buy.
Rhythms NetConnections lost 3/16 to 14 9/16 after beating earnings by 12 cents with a second-quarter loss of $2 a share.
TicketMaster Online slipped 3/16 to 20 5/8 after beating estimates by 4 cents with a second-quarter 52-cent loss. Cheap Tickets
lost 1 1/2 to 11 5/8 after reporting second quarter earnings of 21 cents a share, a penny ahead of estimates.
Open Market fell 13/16 to 7 1/16 after reporting second quarter earnings of 16 cents a share, 2 cents better than expected.
USinternetworking fell 2 3/16 to 16 5/16 after beating estimates by a penny with a second-quarter loss of 43 cents.
New Focus reported a second-quarter loss of 13 cents, 3 cents better than expected, and announced a secondary offering of 3.5 million shares. The stock lost 28 1/16 to 126.
@Plan slipped 1/16 to 7 after beating estimates by 3 cents with an 11-cent loss. Egghead.com
lost 7/32 to 2 11/16 after beating estimates by 6 cents with a 44-cent loss.
NetRatings fell 3 1/2 to 20 after matching estimates with a 4-cent loss. MyPoints.com
fell 1 5/16 to 15 5/8 after reporting a loss of 19 cents a share, 12 cents better than expected. InterNAP
fell 2 to 42 9/16 after beating estimates by a nickel with a 19-cent loss.
Mail.com added 3/32 to 8 3/8 after beating estimates by 3 cents with a 49-cent loss. Netegrity
lost 5 1/4 to 79 despite beating estimates by 2 cents with a 1-cent loss. Razorfish
fell 1 7/64 to 19 3/8 after beating estimates by a penny with 8-cent earnings.
DoubleClick slipped 1 1/4 to 35 3/8. The company named COO Kevin Ryan as its new CEO.
JDS Uniphase added 1 15/16 to 132 1/8 after trading as low as 126 1/2. The stock, which is being added to the S&P 500 tonight, when the company also reports earnings, has been struggling to stay above its 130-131 breakout point.
Some technical comments on the market: As we’ve said a few times since last Tuesday, this looks like a market that wants to go lower. It’s fulfilling that potential today. We’ll begin with the S&P 500. The index broke its bearish rising wedge on Monday; yesterday it rallied back exactly to the lower boundary of the wedge, and today it’s heading lower. That action would seem to confirm the bearish pattern, with potential downside to 1361, where the wedge began in May. Next support is around 1440, and critical support is 1390, the index’s October 1998 uptrend line. A break of that trendline could carry the index to 1170 or lower, so we do not want to violate that line. To the upside, the lower boundary of the wedge is now around 1478. We turned back at 1476 yesterday. The ISDEX also may be forming a rising wedge, with the lower boundary at about 725; a break of that line could carry the ISDEX all the way back to 560, its May low. Below 725, 700 has proven strong support; a closing break of the index’s recent intraday low of 692 would be a warning sign. To the upside, there is 790 resistance, where the ISDEX turned back yesterday. Above that, the index turned back recently at 840, just below its 50% retracement level of 845. If Net stocks can get past 850 resistance, they could go to 880. The Nasdaq broke a bearish flag to the downside this morning. The index has declined steadily since breaking its bearish wedge just under 4100. To the downside, the Nasdaq’s 200-day moving average is at 3867, and important recent support is 3820-3830. The Dow broke its trading range of 10,675-10,875 today, and then negated its recent breakout by falling below 10,620. The pattern would appear to indicate potential downside of 10,475. The upper boundary of the Dow’s bearish diamond pattern is 11,000, and the lower boundary is 10,200-10,300. One final comment: we’ve had bearish rising wedges on the S&P 500 and 100, the Nasdaq and Nasdaq 100, the ISDEX, the banking index, the semiconductor index, and potentially the Dow, in addition to a number of individual stocks like PMC Sierra. The appearance of all these bearish signs at once raises caution flags, particularly heading into the seasonally weak August to October timeframe. That said, the indexes are oversold and due for a bounce here. Let’s hope it’s a strong one.
