Sun Sets On Stocks

Stocks plunged Wednesday on an earnings warning from Sun Microsystems and downgrades to optical stocks.

The ISDEX cratered 18 to 245, and the Nasdaq plunged 91 to 2084. The S&P 500 dropped 19 to 1248, and the Dow fell 166 to 10,872, back below the important 11,000 level. Volume surged to 1.35 billion shares on the NYSE, and 1.95 billion on the Nasdaq. Decliners led 19 to 10 on the NYSE, and 27 to 10 on the Nasdaq. For earnings reports, visit our earnings calendar at and reported earnings at For after hours quotes and news, visit our after hours trading site at

Sun , off 2.42 to 16.25, set the tone after warning that earnings will be 2-4 cents a share, less than analysts’ estimates of 6 cents. The company declined to provide forward guidance, and blamed the shortfall on unexpected weakness in Europe.

A day after calling off its proposed merger with Lucent , Alcatel fell 2.12 to 25.29 on an earnings warning. Redback rose .30 to 14 on speculation that it could become Alcatel’s next takeover target.

A day after breaking 50 support, Juniper plunged 6.31 to 40.08 after CIBC WorldMarkets cut estimates and said the company probably won’t introduce a new router until the fall.

Optical stocks were hit hard by downgrades from Morgan Stanley, based on reduced carrier spending plans and pricing pressure. Nortel fell 1.27 to 13.35, JDS Uniphase dropped 2.24 to 16.93, Sycamore lost 1.19 to 9.04, and Tellabs lost 3.53 to 33.85, breaking 36 support. 31-32 is the stock’s recent low.

Oracle fell 1.12 to 14.49 on speculation by Goldman Sachs that the company could warn as soon as Friday or Monday.

Extended Systems dropped .63 to 7.77 after announcing it will hold a conference call tomorrow after the close to discuss its business outlook.

RealNetworks added .36 to 10.98 on an alliance with Intel .

Openwave , off 5.88 to 35.85, crashed through 40 support.

eBay rose .15 to 59.90 on positive analyst comments.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link:

Nothing good to report today. The indexes all broke important support today, and the S&P 500 and the Nasdaq closed 4% from critical support at 1200 and 2000, respectively; below those levels, a retest of the lows becomes likely. The Dow (first chart) fell back below 11,000 support, and the failure to reclaim its main downtrend line looks pretty unattractive when plotted on a weekly chart. The index has support about every 100 points from here, and would trade with a negative bias below 10,600. The S&P 500 (second chart) is back below important 1265 support, the neckline of a potential inverted head-and-shoulders bottom. The index could find support in the 1220-1240 range, and 1254-1265 is now resistance. The Nasdaq (third chart) is back below its September downtrend line, which appears to be at about 2100. 2060 is the next support below 2080. The Nasdaq 100 (fourth chart) is sitting right above important support at 1775. The only good news is that the indexes are short-term oversold and are entering a period with a positive bias, the end of one month and the first couple of days of a new month.

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