Traders Shake Off Earnings Jitters

Technology and Internet stocks pared early losses to end the day modestly lower on Monday, a day ahead of Cisco’s earnings report and a Sun Microsystems analyst meeting.

The ISDEX http://www.wsrn.com/apps/ISDEX/ slipped 1 to 384, 13 points off its low, and the Nasdaq declined 17 to 2643, 47 points off its low. The S&P 500 climbed 4 to 1354, and the Dow rose 101 to 10,965. Volume declined to 1 billion shares on the NYSE, and 1.6 billion on the Nasdaq. Advancers led 16 to 14 on the NYSE, but decliners led 22 to 15 on the Nasdaq. 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.

Traders continued to worry about tomorrow’s earnings report from Cisco , down 7/8 to 34 5/8. Analysts have cut earnings estimates to 19 cents a share after two stealth warnings from the company last month. Sun Microsystems , off 1 7/16 to 27 3/4, meets with analysts tomorrow.

PurchasePro fell 4 to 21 1/8 after an article in Barron’s questioned the company’s business model and valuation. The company issued a strong defense, and SG Cowen reiterated its Buy rating on the stock. Ariba lost 1 7/16 to 32 11/16, and Commerce One finished unchanged at 29 after trading as low as 26 3/16.

Palm dropped 3/4 to 22 7/16 after Wit SoundView said the company’s February quarter may be a little weak.

Juno soared 1 1/16 to 2 29/32 on speculation that Microsoft could make a play for the company.

MicroStrategy edged up 3/8 to 16 1/4 on a deal with FleetBoston Financial.

Redback Networks surged 3 21/32 to 43 29/32 on a multi-year deal with Qwest.

JDS Uniphase rose 1/16 to 50 1/16 after Deutsche Bank Alex. Brown lowered earnings estimates but said the imminent approval of the company’s merger with SDL could clear up uncertainties.

Exodus fell 4 3/8 to 18 13/16 after announcing that it will issue 13 million common shares and $500 million in convertible notes.

China.com dropped 1/2 to 6 1/16 after announcing that it will write down $70 million against fourth quarter results.

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

We like what we see here – if the Nasdaq and Nasdaq 100 can hold around their lows of this morning (2600 on the Nasdaq and 2400 on the Nasdaq 100). The Nasdaq (first chart) is holding around its September 1 logarithmic downtrend line, and could be reforming a steeper rising channel (the gray lines). While the Nasdaq 100 (second chart) has broken back below its September log downtrend line, a negative, the big techs are finding support on the lower boundary of a rising channel, a plus. And both indexes finally filled those pesky gaps, at 2618.55 on the Nasdaq and 2470.72 on the Nasdaq 100, removing those downside lures. A rocky market since the January 3 lows, but the chart picture appears to continue to favor the bulls, if the Nasdaqs can reverse soon. And the outperformance of the Nasdaq relative to the Nasdaq 100 could indicate broader-based buying for a change, another point in the bulls’ favor. One negative is that the Ph

iladelphia Semiconductor Index was 4% lower today; since the semis tend to lead the Nasdaq, that’s one index to keep an eye on. The ISDEX (third chart) recovered after falling below 380 support, a plus for Net stocks.

The S&P 500 is well above any critical support. The closest, the lower rising channel boundary, is around 1330.

The Dow is back above its September downtrend line (chart not updated). To the downside, we expect that lower trendline at about 10,700 to hold, if the Dow gets that low. A close above 11,007 would be bullish under Dow Theory, the oldest school of technical analysis, particularly if the Dow Transports can stay above 3000; the Trannies continue to hold comfortably above that level. But the 11,000 level has been one tough obstacle for the Industrials, reflecting its importance to the health of the market and the economy as a whole.

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