Traders showed up in a selling mood on Friday, dumping shares of America Online and other stocks despite better than expected earnings. The broader market traded lower on earnings warnings from Ericsson and Agilent.
The ISDEX declined 19 to 810, and the Nasdaq dropped 56 to 4128. The S&P 500 fell 10 to 1485 and the Dow was off 92 to 10,751. Volume declined slightly from Thursday, to 470 million shares on the NYSE and 762 million on the Nasdaq. Declining issues led 14 to 10 on the NYSE and 23 to 12 on the Nasdaq. Priceline
will report earnings before the bell on Monday.
America Online announced fourth-quarter earnings of 13 cents a share, 2 cents better than expected. Revenues came in at the lower end of expectations at $1.93 billion, and advertising revenues were also a little light. The stock fell 3 3/16 to 58 3/8.
Inktomi was one of a few notable standouts, rising 3 3/8 to 132 13/16 after reporting third-quarter earnings of 4 cents a share, 2 cents ahead of expectations.
Alteon Websystems crushed earnings estimates, reporting fourth-quarter earnings of 17 cents a share, 14 cents better than expected. Alteon also said it will buy Pharsalia for $221 million in stock. Alteon gained 6 11/16 to 141.
Phone.com also beat estimates handily, reporting a fourth-quarter loss of 10 cents a share, 9 cents better than expected. The stock rose 16 1/8 to 104 1/2, breaking through resistance at 99.
Handspring reported a fourth-quarter loss of 13 cents a share, 6 cents better than expected. The stock rose 2 13/64 to 41 9/16 on positive comments by CS First Boston.
JDS Uniphase rose 7 3/4 to 135 7/8 on stronger-than-expected numbers from merger partner SDL
.
But most stocks beating estimates received rough treatment, resuming a trend that began earlier this week.
Allaire fell 6 25/32 to 41 despite reporting second-quarter earnings of 7 cents a share, 2 cents better than estimates.
BroadVision fell 3 29/64 to 41 29/32 after reporting earnings of 4 cents a share, two cents better than expected. An upgrade to Strong Buy by SG Cowen didn’t help the stock. CNET
reported second-quarter earnings of 3 cents a share, 2 cents better than expected, but the stock declined 1 13/16 to 30 9/16.
Media Metrix reported a second quarter loss of 10 cents a share, a penny better than estimates, but the stock slipped 3/16 to 27 13/16. Autoweb
posted a second-quarter loss of 13 cents, four cents better than expected. But the stock fell on lighter than expected revenues and a USB Piper Jaffray downgrade to Buy from Strong Buy.
Scient announced earnings of 6 cents a share, a penny ahead of estimates. But that stock too was punished, falling 6 3/16 to 56 1/4.
Ventro reported one of the few misses, and traders punished the stock as a result. The company’s second-quarter gross revenue came in at $24 million, well below $30 million estimates. Analysts expressed concern about the health of the Chemdex vertical, and several analysts downgraded the company. The stock fell 6 1/4 to 14 1/8.
The day wasn’t all earnings news. Shares of drkoop.com rose 15/32 to 1 1/2 on news of a merger offer from MilleniumHealth.
Quokka Sports slipped 1/8 to 8 7/8 after announcing that it will acquire Total Sports, which owns The Total Sports Network, for $130 million.
Some technical comments on the market: The major indexes gave back most of yesterday’s gains this morning, and in the case of the S&P 500, all. So where are we headed next? The S&P 500 may be providing some clues.
Since its breakdown out of a small rising wedge three days ago, the index has been forming a rectangle, bounded by 1482 to the downside and 1500 to the upside. While this is a neutral pattern and could break either way, it carries some bias as a continuation pattern, meaning the break is more likely to be in the direction before the consolidation, which in this case is down. A clean break of 1480 should carry the S&P to about 1465, perilously close to the lower boundary of the large bearish rising wedge at 1470. A clean break of the larger wedge would imply downside potential of 1361, where the wedge started in May. Conversely, a clean break of 1500 could carry the index to 1520, the upper boundary of the rising wedge. An upside breakout could lead to a challenge of the upper boundaries, respectively, of the Dow’s diamond pattern (11,000), the S&P 500’s large rising wedge (1520), and the Nasdaq’s large rising wedge (4300), all bearish patterns. In yesterday’s rally, the Dow got past previous resistance in the 10,850-10863 range, only to turn back down at 10,874. A break of 10,620 to the downside would negate the index’s recent breakout.
Nets and techs seem to be holding up better here, and never threatened to give back all of yesterday’s gains today. They finished at their highs yesterday, another positive. Critical support on the Nasdaq is 4050, the lower boundary of the bearish rising wedge; a break of that level would imply downside potential to 3042, where the wedge began. To the upside, the Nasdaq’s rally stalled at 4289, the wedge’s upper boundary and just under the 62% retracement level of 4337. The ISDEX held at key support yesterday (790), preserving its recent breakout. To the upside, the index turned back recently at 840, just below its 50% retracement level of 845. If Net stocks can get past 850 resistance, they could go to 880.
