Strong Jobs Report, Weak Earnings Send Stocks Lower

A strong September unemployment report and more earnings warnings from technology and Internet companies sent stocks broadly lower on Friday.

The ISDEX lost 26 to 677, and the Nasdaq fell 73 to 3399. The S&P 500 dropped 16 to 1419, and the Dow declined 70 to 10,654. Volume declined to 520 million shares on the NYSE, but rose slightly to 845 million on the Nasdaq. Decliners led by 15 to 9 on the NYSE and 25 to 9 on the Nasdaq. The economy added 252,000 jobs in August, above the 225,000 expected by analysts, and the unemployment rate dropped from 4.1% to 3.9%. Hourly wages came in better than expected at a 0.2% increase. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Amazon.com dropped 1 1/2 to 32 1/16 on a rare Sell rating from Janney Montgomery Scott. Technical note: Amazon undercut 31-32 support today, trading as low as 30 7/16. The stock’s low was 27 7/8 on July 31; a break below that low would be a real negative. As we mentioned recently, Amazon broke out of a falling wedge at about 35. That means the stock should have put in a bottom, but CMGI is an example that that’s not always the case: the stock broke out of a falling wedge at 38 in August, but gave a warning when it broke below its July 31 low of 33 1/2 on September 25.

CMGI gained 3/8 to 21 7/8 after the company clarified its cash position and on news of insider buying. The stock traded as low as 18 5/16 before the news. The company is burning cash at a rate of $63 million a month, but it has $654 million in cash and $1.6 billion in securities. CMGI said it expects its burn rate to decrease substantially over the next six months.

VerticalNet crumbled 9 15/16 to 22 1/2 after Wedbush Morgan retained its Hold rating, but cut its price target from $50 per share to $30.

DoubleClick gained 1 3/16 to 25 on a Reuters report that the company could weather the Internet advertising downturn better than its competitors.

Net2Phone lost 2 1/16 to 22 15/16 on margin concerns despite beating estimates by a penny with a 29-cent loss.

Earnings warnings continued right on into earnings season, which begins in earnest next week. Marimba , off 5 15/16 to 5 3/16, Razorfish , down 3 23/32 to 5 1/32, iManage , off 1 7/16 to 4 9/16, and Snowball.com , down 3/16 to 1 1/16, all fell on earnings warnings.

Yahoo dropped 7 to 80 15/16. The company, which has sold off on earnings concerns, reports its results on Tuesday.

Inktomi lost 7 1/2 to 94 1/2. The stock may be forming a descending triangle, similar to one that Priceline broke down out of at 32. A close below 87 would be a big negative for Inktomi.

Some technical comments on the market: Note: We will now be including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

The Nasdaq once again pierced its critical support level, the October 1998 trendline at 3400. However, the Nas

daq 100 continues to hold its October 1998 trendline at 3300. Also, the Dow is barely holding its October 1998 trendline at about 10,600, so we’ll watch the Dow and Nasdaq 100 for the first sign that this market could be in trouble. The S&P 500 is also at a possible support point, its February 2000 trendline (the gray line at about 1407). If these levels don’t hold, this market could be headed a lot lower. We’ll worry about how much lower if they break.

The Nasdaq is still trying to form a falling wedge, a decline with converging boundary lines, so hopefully we can get a bottom here (also in the chart, notice the small bear flag, or upside consolidation, that was broken yesterday, signalling further downside ahead). Resistance in that chart is the upper wedge boundary at about 3500 and the downtrend line from early September at 3600 (the gray line). A break above 3500 would be a sign of a potential bottom. The ISDEX is holding support above 650; below that, next support is 600, and then the May low of 560. To the upside is 700 resistance, and then the 735 level. The Dow needs to get through resistance in the 10,850-10,900 area, and the S&P 500 needs to clear 1460 to have room to run.

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