Yahoo Drops, But Nets Rebound

Yahoo fell on concerns about slowing Internet advertising spending, but the ISDEX managed to post a gain for the day.

Technology shares recovered from a two-day sell-off, but the Dow traded lower on an earnings warning from DuPont. The ISDEX recouped 11 to 820, while the Nasdaq rose 85 to 4098. The S&P 500 recovered 10 to 1502, but the Dow declined 50 to 11,259. Volume declined to 978 million shares on the NYSE and 1.61 billion on the Nasdaq. Decliners led 15 to 12 on the NYSE, but advancers led 22 to 17 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.

Yahoo fell 4 15/16 to 107 1/8, but off its low of 104 1/4, after the company clarified CEO Tim Koogle’s comments about slowing Internet advertising spending made yesterday at the Robertson Stephens Internet Conference in San Francisco. Koogle was initially reported by Dow Jones as saying that advertising is weak and he sees a decline in ad spending in the near term, but what he said was that the period of consolidation in online advertising has taken away some of the upside. Lehman Brothers, which began the stock’s recent slide with negative comments about the tough advertising environment, said it does not believe Yahoo’s near-term results are at risk.

But Koogle’s speech and an earnings warning from Avenue A was enough to send shares of Internet advertising firms lowers. Avenue A, off 7/16 to 7 13/16, said third quarter revenue will come in $10 million less than expected at $44 million. DoubleClick lost 1 3/16 to 36 1/4, and Engage was off 1 1/16 to 11 1/2. But 24/7 Media bucked the trend, up 1 1/16 to 13 1/2.

CMGI lost 3 9/16 to 43 1/8 on news of a restructuring. For more on the story, click here. lost 1 11/16 to 6 3/16 on a judge’s ruling that the company’s copyright infringement was willful. The company was ordered to pay $25,000 for each CD infringed. MP3 had argued that any fine greater than $500 per violation would bankrupt the company. Liquid Audio , off 1 3/16 to 7 5/16, and EMusic , down 1/8 to 2 5/16, pulled back after rallying on the news yesterday. For more on the story, click here.

Broadcom rose 9 1/8 to 235 on a bullish presentation at a Salomon Smith Barney conference. Covad climbed 2 1/16 to 19 5/16 after telling a Bear Stearns conference that it expects to meet or exceed estimates this quarter despite the Verizon strike.

Internet consultants continued to deliver bad news to investors. Organic slipped 9/32 to 5 1/32 after warning that it will post a loss for the quarter instead of the 2-cent profit expected by analysts. The company expects revenues to rise 5% sequentially, better than the declines predicted last week by Viant and iXL . iXL slipped 3/8 to 6 9/16 after announcing the layoff of 350 employees.

Interactive Pictures gained 1 to 9 after agreeing to provide virtual tours on Yahoo Real Estate.

Peapod , up 1/16 to 2 1/16, announced that it was acquiring the Chicago and Washington, D.C. operations of , off 7/32 to 25/32, and exiting the Ohio and Texas markets.

Retek bolted 9 1/8 to 41 1/4 on news of an expanded alliance with IB

M that could generate more than $1 billion in revenues by 2003. BroadVision rose 1 7/8 to 37 7/16 on rumors of a deal with IBM.

General Magic gained 1 3/32 to 8 1/2 on a Dain Rauscher Wessels Speculative Buy rating and $20 price target.

Commerce One added 8 1/8 to 70 13/16, closing above 70 resistance, on news of an alliance with German software firm Intershop and a Buy Aggressive rating from Dain Rauscher Wessels. i2 gained 9 13/16 to 169 13/16, and Ariba tacked on 6 3/16 to 162 1/2.

Open Market gained 3/4 to 8 15/16 on news of a venture in China. Neoforma added 1 to 5 7/16 after announcing that 39 new healthcare facilities will purchase supplies through Marketplace Novation, bringing the total to 79. gave back 1 3/8 to 44 1/2, retracing to Tuesday’s breakout point of 43.

Some technical comments on the market: The Dow rebounded this morning at the lower boundary of a bearish rising wedge (11,225). A break of that level would likely lead to a bigger sell-off in the blue chips. The Dow looks like it is topping out here after struggling with resistance in the 10,300-10,400 area, which capped the index’s recovery in April. 11,100 is the first important support, but the more important support is 10,900, the upper boundary of the Dow’s bearish diamond pattern, which the index broke out of last month. The Nasdaq, S&P 500 and the ISDEX have already broken rising wedges to the downside, so if the Dow follows, the whole market could be headed lower.

We said yesterday that the Nasdaq could find support at 4000, around its 200- and 50-day moving averages (about 4000 and 3980, respectively), and the index did. The Nasdaq recovered nicely today, but the move came on lower volume than the last two days of selling. The Nasdaq’s broken wedge boundary is about 4150, so we would expect any rally to be capped there. The Nasdaq finished just below 4100 resistance today, and the 38% retracement level (4106) of the move down from 4259 to 4013. The Nasdaq and Nasdaq 100 have potential downside to their lows of a month ago, but we are hopeful that the sell-off can end at the downtrend lines broken two weeks ago. Those downtrend lines are now at about 3900 on the Nasdaq and 3800 on the Nasdaq 100. If the indexes can turn up there, it would be a positive sign. A break below those levels would likely lead to a wider sell-off. First support on the ISDEX is 790-800, but critical support is about 700, which is now the intersection of the index’s March downtrend and May uptrend lines. To the upside, the ISDEX’s lower broken rising wedge boundary is now around 835. The S&P 500 is back above the important 1500 level. The boundary of its broken rising wedge is now around 1515 and climbing. To the downside, next support is in the 1480-1490 range. The index has met with strong resistance around its all-time closing high of 1527.

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