Yahoo beat earnings and revenue estimates after the bell on Tuesday, but an earnings warning from Lucent pressured telecom equipment stocks.
Stocks dropped sharply during the day on earnings worries, led lower by semiconductor stocks. The ISDEX lost 26 to 665, and the Nasdaq dropped 115 to 3240. The S&P 500 lost 16 to 1385, and the Dow declined 44 to 10,524. Volume rose from Monday’s light holiday trading, to 1.04 billion shares on the NYSE and 1.86 billion on the Nasdaq. Decliners led by 16 to 11 on the NYSE and 26 to 13 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.
Yahoo fell 3 1/16 to 82 11/16 ahead of its earnings report, and rose to 84 after the close. The company beat estimates by a penny with 13-cent-a-share earnings, in line with the whisper number. Revenues of $295.5 million beat estimates of $280-$285 million.
During the day, Ticketmaster Online slipped 3/4 to 13 after announcing an expanded partnership with Yahoo. Net2Phone
rose 3 7/16 to 24 on news that the company and Yahoo will partner to offer voice-based services. And Speechworks
gained 4 1/4 to 61 after announcing that its technology will convert Yahoo! Mail text messages to speech for the new Yahoo! by Phone service.
Cisco fell 3 3/15 to 50 1/2, just above critical 50 support, its May low.
National Discount Brokers soared 22 7/16 to 47 11/16 on a $49-a-share takeover offer from Deutsche Bank. NDB also said it had received merger inquiries from other companies.
Incubator Safeguard Scientifics rose 9/16 to 17 3/4 after partner company Nextron filed for an IPO.
Open Market dropped 3/4 to 3 3/16 on an earnings warning.
B2B stocks, yesterday’s big winners, were weak. One exception was BroadVision , which climbed 1 7/16 to 23 3/8, continuing yesterday’s gains on a partnership with i2
, which lost 4 to 169.
Akamai , a big winner yesterday, lost 2 1/8 to 41 3/4 after Merrill Lynch lowered its long-term rating to Accumulate from Buy.
Inktomi fell 6 3/4 to 89 3/4. As we said last week, the stock may be forming a descending triangle, similar to one that Priceline broke down out of at 32. A close below 87 would be a big negative for Inktomi.
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
We’re getting tired of saying this, but the market is technically very oversold and due to rally. Hopefully, Yahoo’s earning will give this market a reason to bounce; Lucent has had enough of its own problems that it shouldn’t take down the whole telecom equipment sector. That said, stranger things have happened in this market. The Nasdaq continues to find support from a large congestion area from September-October 1999. If that breaks, here’s hoping the May 3042 low holds. If not, the final bottom will likely be in the 2500-2900 area. To the upside, we want to see the Nasdaq get back above 3350, a small downtrend within a do
wntrend, then 3521, its previous bottom, and then 3550, its main downtrend line. As we said yesterday, that downtrend chart is actually a positive: bear markets tend to form clear downtrend channels only toward the end. Earlier “panic” phases, like the April and May sell-offs, do not form parallel trendlines.
The ISDEX found support yesterday at a trendline from its August 1999 lows. The index seems to be in a 200-point trading range between 650 and 850. This pattern, called a rectangle, is neutral, but holds an upward bias since it is forming in an uptrend from the 560 May low. A break of the pattern either way should carry the ISDEX 200 points, the size of the consolidation, so we want to hold 650. First resistance is the ISDEX’s downtrend line at about 700.
The Dow has so far found support at its April trendline; the index could go as low as 10,450 and hold that line. It turned up at 10,488 today. Also, note the potential ascending triangle that the Dow is forming, an ascending lower trendline with a flat resistance line at the top of the pattern at 11,400. If the Dow can hold its April trendline, that chart pattern is actually bullish. The Nasdaq is also forming a similar pattern if it can hold its October 1999 trendline. The S&P 500 could also be forming an ascending triangle, with its February trendline forming the lower line. If these patterns hold, it could take a long time for them to break to the upside, and could mean that the market stays in a trading range marked by these lines for some time to come. However, an ascending triangle is a very legitimate bottom, as long as these patterns continue to hold and form, obviously. In the intraday charts, notice how the Dow and S&P are hovering around their September downtrend lines. They look like they are looking for an excuse to rally; let’s hope earnings reports give them a reason. Also, the S&P traded as low as 1383 today, completing the down move predicted from the broken rectangle from 1420-1460.
Finally, we noted last week that just about all the October 1998 trendlines were broken. So what’s next? The trendlines from late 1994, the start of the great bull run, are the next major trendlines. Those lines are all a long way from here, the closest one being the Dow at 9,500, then the S&P at about 1200 and the Nasdaq at about 2000. But what happens when we use a logarithmic chart, which charts moves based strictly on percentage terms instead of treating all point moves the same? We get a broken logarithmic 1994 trendline on the Dow, a 1994 log trendline of about 2400-2700 on the Nasdaq, and most importantly, a 1994 log trendline of about 1380 on the S&P 500, right here. For comparison, we are publishing the 1994 logarithmic and linear trendlines on the S&P 500. It makes 1380 pretty important support, since the S&P has never broken that line.
