Techs, Nets Lag Blue Chips

Blue chip stocks outperformed Internet and technology issues on Friday, despite better-than-expected earnings from JDS Uniphase.

The ISDEX slipped 6 to 600, but the Nasdaq tacked on 6 to 3278. The S&P 500 climbed 14 to 1379, and the Dow soared 210 to 10,590. Volume slipped to 1 billion shares on the NYSE and 2 billion on the Nasdaq. Advancers led by 17 to 10 on the NYSE and 20 to 18 on the Nasdaq. The GDP report came in weaker than expected, with some signs of inflation pressures, but wasn’t as bad as traders feared. Financial stocks rallied on the news, perhaps anticipating a Fed easing. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

JDS Uniphase rose 3 1/16 to 77 1/2 after the company’s 18-cent earnings beat estimates by 2 cents. Revenues of $786.5 million beat estimates of $750-$760 million, and the company guided forward estimates higher. Nortel’s revenue miss on Tuesday gave Internet infrastructure companies a tough couple of days. Juniper Networks was off 7 1/8 to 183 despite a Banc of America Buy rating and $270 price target. Technical note: JNPR cannot close at 174 or lower, or it will break a broadening top, with potential downside to 120.

Cisco Systems , off 2 9/16 to 51, was weak on rumors of an impending downgrade from a major brokerage. The company reports earnings Nov. 6.

Inktomi dropped 15 to 68. The company beat estimates by 2 cents with 7-cent earnings, but lowered forward guidance. Technical note: We reported some time ago that Inktomi broke a bearish descending triangle at 87. The stock could have downside to 50 and potentially lower.

Amazon.com slipped 1 9/16 to 35 5/16 on a Lehman Brothers report that claimed the company had reclassified $96 million in equity investments as cash, inflating the company’s cash level by 10%. Lehman said the reclassification raises balance sheet concerns, and continued to urge investors to avoid Amazon’s convertible bonds.

Art Technology Group , off 19 9/16 to 65, beat earnings estimates but filed for a 4.7 million secondary share offering.

Lycos rose 5/16 to 41 after shareholders approved the company’s merger with Terra Networks .

Sapient gained 5 to 36 after matching estimates with 12-cent earnings. CS First Boston issued a broad downgrade of e-consultants, saying the stocks had little upside but could fetch attractive buyout premiums.

Handspring , off 17 to 78 1/2, dropped on a warning from British handheld maker Psion, but Merrill Lynch defending HAND, Palm and Research In Motion , saying Psion’s problems were company-specific.

Homestore.com surged 8 to 37 1/4 on news that it was buying Cendant’s real estate portal for about $760 million in stock.

Aether Systems added 2 25/32 to 96 29/32 after beating estimates by 25 cents with a 40-cent loss. Clarent , up 4 1/4 to 32, beat estimates by 7 cents with 4-cent earnings. NBC Internet , up 1 5/32 to 6 1/16, beat estimates and guided forward estimates higher.

Digex fell 4 3/4 to 36 1/2 after beating estimates by 3 cents with a 61-cent loss. MicroStrategy rose 1 3/8 to 24 3/8 after beating estimates by 16 cents with a 37-cent loss.

InterTrust tacked on 3

/8 to 9 after beating estimates by a penny with a 13-cent loss. Autobytel.com lost 7/8 to 4 7/8 after beating estimates by 2 cents with a 28-cent loss. Buy.com , up 5/32 to 2 7/16, Mail.com , down 23/32 to 3 25/32, and theglobe.com , off 1/8 to 21/32, all reported better-than-expected losses.

Some technical comments on the market: Note: We are now 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 Dow took out its secondary downtrend line around 10,400 yesterday and continued past 10,500 today. Also, the index broke out of the upper trendline of what could be a rising wedge, a potentially bullish development. 10,600-10,750 is a very important resistance range for the Dow, covering everything from the index’s main downtrend line since January, to its broken October 1998 uptrend line, and the apex of the Dow’s old diamond pattern, which has been broken both to the upside and the downside. The most recent sell-off in the market broke a two-year downtrend in the Dow’s performance relative to the Nasdaq (apologies for the BMP file); the downtrend break could signal the beginning of the long-term outperformance of value over growth. “Value” could be loosely defined, however, since Microsoft has been the index’s best performer as of late. Still, a trend worth keeping an eye on.

The Nasdaq 100 turned back today at a gap at 3283 created Wednesday morning after Nortel missed revenues. That gap, and a gap up from last week, formed what is called an island reversal, essentially stranding investors who had bought on the gap up last week. It was a sign of a reversal back down. The Nasdaq 100 needs to get above 3326 to fill that gap and negate the reversal. The Nasdaq is back above its September downtrend line. Also, notice the second line above that, which could also pose resistance. The Nasdaq also could be forming a bearish broadening pattern here, but it’s way too early to call. Also, given that the Nasdaq’s bottom may have been a falling wedge, slow progress on the index should be expected.

The ISDEX retested its May low and broken September downtrend line yesterday. To the upside, 650 is first resistance, and 700 has proved tough resistance after that. That index too could be forming a broadening pattern, but again, it’s too soon to call. The S&P 500 has so far managed to hold its 1994 logarithmic trendline at about 1350, getting as low as 1337 yesterday. The S&P cannot close below that line by more than 2%, or 1323. The S&P found support at its September downtrend line yesterday, and could be forming either an inverted head and shoulders bottom or a bear flag. The secondary downtrend line just above 1380 is first resistance. However, given that earnings and major economic reports are out of the way, we see no reason why the market can’t rally for a while, barring some unforeseen shock, particularly since the market is entering the best six months of the year on a historical basis.

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