When Support Turns Into Resistance

October 23, 2003
Vincent Mao

Stocks are
lower again this midday. The major
indices are continuing to sell off, however they are well off the lows of the
session. Tech issues are the focus of today’s session as declines in KLA-Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating), Macromedia
(
MACR |
Quote |
Chart |
News |
PowerRating), and Computer Associates are driving the
Nasdaq almost 1% lower. KLA-Tencor reported a 28% drop in quarterly earnings but
still managed to beat analysts’ estimates. However, the company’s new orders
growth of 1% fell below its own target of 5%. Macromedia cut its revenue-growth
target by half due to a slow start of its Studio MX 2004 software. The company
did not offer pre-release versions of the software. Computer Associates reported
that its second-quarter loss widened to 15 cents a share compared to 9 cents a
share in the year-ago quarter. Looking ahead, the company sees revenues of $825
million to $845 million or below Wall Street targets of $850 million.

The indices did break support
at their 20-day moving averages yesterday and are trying to get back above the
key average. The 20-day now acts as resistance. Helping to cushion the fall
today, initial jobless claims last week fell by 4K and remains under the
critical 400K level. This matched an earlier eight-month low.

Initial Jobless Claims for the
week ended 10/1/2003 came in at 386K versus economist expectations of 385K.

10-year Bonds are -100
at 111 310.

The dollar
is +0.21 at 91.74.

Gold is -1.30 at 385.50.

Crude Oil is +0.24 at
30.16.

Volume is 926,000,000 on
the NYSE, and 1,117,000,000 on the Nasdaq.

Market breadth is negative,
with NYSE declining issues over advancing issues by 1.51 and down over up
volume by1.58; Nasdaq declining issues over advancing issues at 1.64, and down
volume over up volume at 2.38.

Top Dow stocks are:

Stocks in the news:

JetBlue Airways
(
JBLU |
Quote |
Chart |
News |
PowerRating)
is lower by 7.6% despite reporting quarterly profits that topped estimates by a
penny. The discount airliner reported third-quarter profits of 39 cents a share
compared to 18 cents a share in the year-ago period. Revenues jumped 65% to
$273.6 million. Operating margins increased to 19.7% from 13.6%. CEO David
Neeleman commented “Our strong financial results this quarter are the result of
great customer demand coupled with ongoing cost control diligence”.

Video game publisher
Electronic Arts
(
EA |
Quote |
Chart |
News |
PowerRating) is lower by 4.7% after lowering their forecast of
PS2 console sales. The publisher of hit titles such as “The Need For Speed”
series and “Madden NFL 2004” reported second-quarter earnings of 50 cents a
share compared to 34 cents in the year-ago quarter. Revenues rose 16.7% to $530
million. Analysts were looking for earnings of 44 cents a share and revenues of
$517.5 million. Looking ahead, the company sees next quarter’s revenues between
$1.425 billion to $1.475 billion and earnings of $2.30 to $2.40 a share.
Consensus estimates are calling for revenues of $1.48 billion and earnings of
$2.29 a share.

Software maker Veritas
(
VRTS |
Quote |
Chart |
News |
PowerRating)
is trading higher by more than 7% after reporting that third-quarter profits
doubled from year ago levels. Late yesterday, the company posted earnings of 18
cents a share compared to 9 cents a share in the year-ago quarter. Revenues
jumped 23% to $450.9 million as a result of increased sales of its Backup
software. Looking ahead, the company sees fourth-quarter revenues between $480
million to $490 million and earnings of 21 to 23 cents a share. Analysts are
currently looking for revenues between $448.7 million to $497.5 million and
earnings of 23 cents a share.

Semiconductor equipment maker
KLA-Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating) is lower by 8.5% after reporting a drop in
quarterly earnings. The company reported first-quarter results of 18 cents a
share compared to 26 cents a share in the year-ago quarter. Earnings topped
estimates by a penny. Revenues did drop 15.3% to $318 million. However the stock
is under pressure as the company’s guidance for the current quarter are below
consensus estimates. The company is projecting earnings of 18 or 19 cents a
share on revenues of $320 million to $325 million. Analysts are looking for
revenues of $348 million and earnings of 22 cents a share.

Software maker Macromedia

(
MACR |
Quote |
Chart |
News |
PowerRating) is lower by more than 35% after the company cut its growth
forecast. The maker of the popular “Flash” and “Shockwave” programs cut its
revenue forecast by half to 5%-10% from 10%-20%.