The Federal Reserve came through with an expected 50-basis point rate cut on Wednesday, but the market’s initial reaction was muted.
The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 4 to 443, and the Nasdaq slipped 3 to 2834. The S&P 500 lost 1 to 1372, and the Dow rose 12 to 10,893. Volume declined to 480 million shares on the NYSE, and 945 million on the Nasdaq. Advancers led 17 to 11 on the NYSE, and 19 to 14 on the Nasdaq. Fourth quarter GDP came in much lower than expected at 1.4%, the slowest rate of growth for the economy in six years. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.
AOL Time Warner , up 1.30 to 55.61, matched 15-cent estimates and affirmed full-year views. On a combined basis, the companies earned 28 cents a share.
Amazon.com fell 1 11/16 to 17 1/4 after beating estimates by a penny with a 25-cent loss, but the company warned that first quarter revenues will be 15-20% below estimates. Amazon said it will cut 1,300 jobs, or 15% of its workforce, and said it still expects to reach profitability by the end of the year.
Adobe , off 7 3/16 to 45 9/16, and Applied Materials
, down 3/4 to 52 3/4, also warned. Advanced Fibre
rose 3 15/16 to 24 1/2 after beatings estimates, but Aware
, off 4 to 16 7/8, and PeopleSoft
, down 6 5/8 to 42 5/16, didn’t fare as well despite than expected results.
RealNetworks , up 1/8 to 10 7/8, matched estimates. Digital Island
, up 1/2 to 6 1/2, said it expects to breakeven by mid-2002 and has the cash to get there.
Broadcom rose 6 1/4 to 119 3/4 on rumors of a deal with Cisco
.
New Focus soared 10 3/4 to 60 1/8 after blowing away estimates by 7 cents with 4-cent earnings. TIBCO
dropped 5 3/16 to 40 11/16 on negative comments from Morgan Stanley.
DiamondCluster , up 4 1/16 to 36 3/4, matched estimates and lowered forward guidance. F5 Networks
, up 1 15/32 to 17 3/32, topped estimates, as did Oplink
, up 1/16 to 19 15/16, and Digital Impact
, up 1/2 to 4 5/8.
PurchasePro climbed 1 19/64 to 28 3/4 on an expanded relationship with AOL Time Warner, including PPRO’s first offline advertising campaign.
Genuity , off 3/16 to 3 15/16, met estimates but lowered forward guidance. eLoyalty
climbed 57/64 to 9 7/8 on a positive preannouncement.
NetPerceptions , off 1/8 to 3 7/16, and Autoweb.com
, down 1/16 to 15/32, both fell on earnings warnings. LifeMinders
, down 3/4 to 3, missed estimates by a wide margin.
Some technical comments on the market: Note: We are now including charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html
Note: The technical commentary was written before the Federal Reserve decision on interest rates. It will be updated for the market close. Also, there will be no technical commentary tomorrow; it will return on Friday.
As we’ve been saying for the last two days, the market has been setting up for a big run on further Federal Reserve rat
e cuts. The Nasdaq 100 has broken out of what looks to be a bull flag (the small blue lines in the first chart), giving the index 500-600 points of upside potential.
On the intraday charts, the Nasdaq is trading below broken support (the gray line), and doesn’t have much room to go until it hits the upper boundary of its larger channel (the black lines). However, if we redraw the channel to encompass the recent lows under 2700 (the blue lines), we get a new rising channel that encompasses the recent highs. Based on the consolidation after the run from 2700 and 2850, the Nasdaq looks like it’s head to 3000 in the near-term (3028.75 was its December high in that area). One near-term support is that small black line at 2700, the top of the gap at 2618.55 (the corresponding gap in the Nasdaq 100 is 2470.72) that the index has so far refused to fill. Unless traders sell on the Fed news, we expect it may be some time before that gap fills. The maximum downside expected on the Nasdaq is about 2550, the lower channel boundary (black line) in that chart. A lot of technical indicators on the Nasdaq have remained overbought, but the index has so far been pulling back just enough to get room for more upside, the reverse of the September-January decline.
The ISDEX is also breaking out of a small bull flag (the blue lines), and could be headed for 490 in the near-term, just about where that broken support line is (the gray line). Near-term support on the ISDEX is the small black line at about 425, the top of a gap at 388. Maximum downside potential is 380-388.
The S&P 500 is clinging below a broken support line, the one thing that looks a little worrisome to us. The index was rejected at that line this morning. Maximum expected downside would be that lower black channel line at 1310, and the index doesn’t have much room until it hits the upper channel boundary.
Taking a longer-term look at the Dow, the index is trading just beneath a downtrend line off its September high at 10,900. That trading range between the downtrend line and a line off its October bottom at about 10,550 will have to resolve soon, and it looks to us like it wants to resolve to the upside. The minimum upside target based on that pattern would be 11,500; the maximum would be 12,500-13,000. 10,500 has been strong support on the index, and critical support is 10,300. A close above 11,007 would be bullish, particularly if the Dow Transports can get back above 3000 and stay there; the Trannies are comfortably back above 3000 today. A number of bullish signs are lining up in advance of the Fed decision; we’ll see how traders react at 2:15 p.m.
Special report: For a free introduction to technical chart patterns and an overview of last year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.
