Yahoo Warns; Koogle Out

Yahoo issued an earnings warning after the close on Wednesday, and announced that CEO and Chairman Tim Koogle will step down as CEO.

During the day, stocks rallied despite earnings warnings from Broadcom and JDS Uniphase. Cyclical issues soared on a Fed Beige Book reading that showed a slowing economy and few inflationary pressures, raising hopes for a 50 basis point rate cut when the Fed meets on March 20.

The ISDEX http://www.wsrn.com/apps/ISDEX/ finished unchanged at 282, and the Nasdaq rose 19 to 2223. The S&P 500 climbed 8 to 1261, and the Dow soared 138 to 10,729. Volume rose to 1.12 billion shares on the NYSE, and 1.74 billion on the Nasdaq. Advancers led 19 to 11 on the NYSE, and 19 to 16 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.

Yahoo fell 3 1/2 to 18 1/2 after warning that the company will post breakeven results this quarter, 5 cents below estimates. Revenue of $170-$180 million will miss estimates of $230 million. The company will conduct an outside search to find a new CEO, but Koogle will remain as chairman. Yahoo also announced a $500 million stock buyback program. The stock was halted all day after canceling an appearance for tomorrow at the Merrill Lynch Internet Conference.

But earnings warnings don’t seem to be having much effect on the broader market lately. JDS Uniphase, Broadcom and InterNAP were the latest to warn. Broadcom fell 7 5/8 to 40 1/4 after warning that earnings will come in at 8-9 cents, well under the 27 cents expected by analysts, and announced that a major customer had cancelled a contract. JDS slipped 1 to 27 after guiding estimates down from 17 cents a share to 14 cents. InterNAP plunged 2 13/32 to 1 15/16 after warning that quarterly and full-year revenues will come in light.

PurchasePro surged 1 1/2 to 11 3/4 on a positive earnings pre-announcement. Ariba rose 7/16 to 15 3/8 on analyst comments that the stock is undervalued.

Extended Systems rose 7/16 to 23 9/16 on news that it will be acquired by Palm , which rose 2 11/16 to 22 1/16.

The IPO of Loudcloud , the latest venture of Netscape co-founder Marc Andreessen, was pushed back to Friday.

Audiocodes fell 4 9/16 to 14 3/8 on UBS Warburg comments that the company could have a tough time making its numbers. Ulticom , up 3 9/16 to 28 15/16, continued to rally on good earnings news.

Investors in Check Point must have liked what they heard at yesterday’s analyst conference, because the stock added another 4 1/4 to 70.

eToys filed for Chapter 11 bankruptcy and will be delisted from the Nasdaq tomorrow.

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

The Nasdaq is trapped in a 50-point range here, between 2200 and 2250. To the upside is a downtrend line from September and the January lows, both around 2250 (first chart). To the downside is 2200 support (second chart), below which the Nasdaq would begin to fill two gaps at 2142 and 2117. Which way will the trading range resolve? Our best guess is to the do

wnside, because the Nasdaq formed another potential candlestick reversal pattern today by closing below where it opened (2241.23). These strong opening gaps up and weak closes are not a sign of strength, but we hope the Nasdaq proves us wrong here. A close above 2318 would give the index a higher high, and 2071 is critical support, the Nasdaq’s re-formed 1990 logarithmic trendline. We suspect that the recent lows on all the indexes may hold, but a retest of those lows is not out of the question.

The S&P 500 may have a higher February downtrend line than we thought (the upper trendline in the first chart), and is also being halted by its September downtrend line at about 1265 (second chart). If the index can close above 1275, its early January low, it could be headed for 1335. 1234-1240 is first support on the index, and 1214 is critical support.

The Dow took out both 10,650 and 10,700 resistance on a closing basis, and will trade with a positive bias if it can hold above 10,650. 10,800-10,900 is next resistance, and a close above 11,000 would be bullish. To the downside, 10,600-10,700 should now be strong support, and then 10,450-10,500 is next support. A close below 10,292 could lead to a retest of the index’s lows in the 9600-9700 area, although 10,200 or so could also provide support. The Dow Transports finished just under 3000 today (2990), a good sign.

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.

News Around the Web