Stocks Struggle, Then Surge

Showing resiliency in the wake of Cisco Systems’ dire Q3 earnings warning, stocks shook off a daylong malaise to finish trading Tuesday on a positive note.

Not only did Internet and tech stocks overcome the networking equipment maker’s warning following Monday’s close, they also had to contend with lukewarm reviews for Yahoo’s appointment of a former movie studio executive as its new CEO.

Gains were modest across the board, with the Dow Jones climbing 58.17, or 0.6%, to 10216.73, and the Nasdaq rising 13.59, or 0.7%, to 1923.16 after falling as low as 1868 in the opening minutes of trading. The S&P 500 was up 11.86, or 1.0%, to 1191.54.

Internet stocks were mixed, with internet.com’s Internet Stock Index, or ISDEX, edging up 0.83, or 0.4%, to 220.92. The ISDEX had 24 gainers and 26 losers, including Cisco (down 3.1% to $16.66) and Yahoo (down 1.8% to $17.31).

Overall, five of the 13 Internet sectors tracked by the Internet Stock Report and WSRN showed more advancers than decliners, with a sixth sector evenly split. For full sector breakdowns, visit WSRN’s Internet sectors page.

Cisco warned Monday that revenues for its third quarter, ending April 30, would be 30% lower than in Q2 and that per-share earnings would be in the “very low, single-digit range.” Analysts had expected an EPS of 8 cents. The company also said it would write off $2.5 billion in excess inventory for Q3, and that fourth-quarter revenues would be flat to as much as 10% below third-quarter sales.

One month after Yahoo CEO Tim Koogle said he would step down, the Internet search portal announced Tuesday it has tapped former Time Warner movie and music division co-chairman Terry Semel as his replacement.

The selection drew reactions from analysts, some of whom wondered if Semel, a 24-year Warner Bros. veteran, had the background necessary to guide an Internet company that relies primarily on advertising revenue.

Online IT information provider EarthWeb soared 44.0% to $3.50 after reporting it had narrowed Q1 losses to $3.7 million, or 35 cents per share, from $11.6 million, or $1.18 per share, in the year-ago quarter. The company also said it intends to change its name to Dice Inc., based on its Dice.com IT jobs Web site, and its ticker symbol to DICE from EWBX. Shareholders will vote on the proposal at the June 13 annual meeting.

Database software vendor Embarcadero Technologies rose 21.4% to $23 per share after narrowing its Q1 loss to 1 cent per share from 18 cents per share a year ago.

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Here are some technical comments from Paul Shread:

April 17, 4 p.m.: An impressive day in the face of Cisco’s earnings
warning, and the futures are up strongly on Intel’s earnings. The
indexes should be headed for some tough resistance tomorrow, not the
least of which will be Dow 10,300, which marks old support and the upper
boundary of a rising wedge (first chart). If the Dow can blow through
that level and negate that rising wedge, we’ll be very impressed. The
S&P 500 (second chart) continues to run into a broken uptrend line, but
the lack of follow-through to the downside is a positive. If the index
can get above 1198 tomorrow, it could be headed for a bout with critical
resistance at 1214-1215. The Nasdaq (third chart) needs to set a higher
high (at 1980). Hopefully it can do that tomorrow. The index broke its
uptrend line off its recent lows, but recovered nicely. In short, good
signs all around, but 10,300, 1215 and 1980 still need to be taken out.