Pulse: Tech Shares Can't Snap Out of Funk

Not even the weekend could separate the market from the nasty mood it has been in of late. The Nasdaq fell apart in an ongoing selloff that could persist after a technical breakdown.

The Nasdaq ended down 108.71, or 2.8%, at 3726.52, near the session lows of 3702.54, as the 3700 level provided some kind of buffer today. TheStreet.com Internet Sector index tumbled 30.81, or 3.8%, to 772.58.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 30.81 -3.8% 772.58 TSC E-Commerce 1.92 -4.1% 44.62 TSC E-Finance 2 15/16 -5.9% 47 1/32 Nasdaq 108.71 -2.8% 3726.52

Again, there was no particular fundamental catalyst for the selloff, just lots of excuses, ranging from higher oil prices to concerns about earnings to weakness in the euro. Perhaps more importantly, many technology stocks were suffering from technical problems that were helping to drag down the rest of the sector.

Take a look at some of the technology bellwethers. Microsoft (MSFT Quote) closed down $1.19, or 2%, at $63, its lowest close since May 31. Intel (INTC Quote) finished off $1.70, or 3%, at $55.81. Not only was it Intel's lowest close since May 23, but it was roughly 25% below the $75.81 high from Aug. 28.

Cisco Systems (CSCO Quote) fell $2.69, or 4.3%, to $60.06, and Oracle (ORCL Quote), which ran as high as $86.75 ahead of its earnings report last week, closed down $1.84, or 2.4%, at $76.47. Without leadership from the big boys, the market is going to have a hard time righting itself.

Also among the day's casualties, Commerce One (CMRC Quote) closed down $5, or 7%, at $65.19; Vignette (VIGN Quote) dropped $3.69, or 10%, to $32.44; Foundry Networks (FDRY Quote) slipped $9.94, or 14%, to $62.31; and CheckFree (CKFR Quote) tumbled $4.13, or 8.7%, to $43.13 as financial stocks had a rough session.

Among stocks in the news, America Online (AOL Quote) closed up 31 cents at $55.56, though it traded as high as $57.69. Interesting that the late selling was blamed on news that the European Commission's antitrust regulators have been passing around a preliminary recommendation to block the merger of AOL and Time-Warner (TWX Quote). Why is that interesting? Because the merger originally was panned by investors, who punished AOL's stock after it was announced. It has been seen in a more favorable light only of late.

According to the online edition of The Wall Street Journal, the European Commission has given the companies until Sept. 27 to offer new concessions. AOL, meanwhile, said the merger remained on track to close this fall.

Finally, Net2Phone (NTOP Quote) closed down $6.75, or 20%, at $27.06. Losses came as the company attempts to shift gears, announcing it would form a new venture to sell Internet phone-system software. That would move it away from its current revenue stream, which relies on service charges for connecting calls over the Internet.

2:21 p.m.: Technical Analysts: More Losses Possible

If you weren't taking the recent declines seriously, you might want to now.

The market was breaking down midday, with the Nasdaq down 88.5 to 3746.7. TheStreet.com Internet Sector index was off 28.43 to 774.96.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 28.43 -3.54 % 774.96 TSC E-Commerce 1.61 -3.46 % 44.93 TSC E-Finance 3.13 -6.25% 46.84 Nasdaq 88.5 -2.31% 3746.7

Today has been more of the same for the market -- concerns about the triple whammy of earnings, oil and the weak euro. As for the technical picture, things aren't looking great, and one technical analyst sees today as a critical day for the market.

Reached at his office around the middle of the trading day, Robert Dickey, director of technical research at Dain Rauscher Wessels, said his best guess was that the market would break down and be in for more significant losses. But, he said, there have been several times of late when the market appeared to be on the verge of a breakdown, only to come right back. Because of these comebacks, Dickey didn't put out a dire forecast.

But lest you think Dickey was sitting on the fence, he offers some guidance. Dickey said today's close will be critical. The Nasdaq was holding near a triple digit loss midday. He said if it closes strong and manages to top the 3800 level, a bottom would be set. But if it closes below 3750 -- a level the Nasdaq has keyed on a number of times over the past few months -- it would be troubling, he said. Dickey said there is additional support at 3500 and 3200.

Dickey says today is such an important day because the market has been gaining momentum on the downside. It has to break that momentum to avoid a steeper selloff.

While much of the market was on the defensive, a couple of online financial stocks were getting pummeled. Knight Trading (NITE Quote) was down 8.8%. The market maker rallied sharply last week on rumors that it would be a takeover target, so today's losses are likely profit taking. TheStreet.com recently wrote about Knight soaring on takeover rumors . Also, CheckFree Holdings (CKFR Quote) was down 10.5%.

10:59 a.m.: Net2Phone Has Static; AOL Grabs Shoppers Attention

Tech stocks were struggling for a gain in morning trading. The Nasdaq was up 11 to 3846.2, after trading as low as 3819.49 early on.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 3.66 -0.46% 799.73 TSC E-Commerce 0.28 -0.60% 46.26 TSC E-Finance 1.38 -2.75% 48.56 Nasdaq 11 +0.29% 3846.2

While the market has reached levels that have become more attractive to some buyers, there are concerns about corporate earnings and rising oil prices.

Among stocks in the news, Net2Phone (NTOP Quote) was down 7.4%. The company said it was forming a new company that will be backed, in part, by Cisco Systems (CSCO Quote), to sell network management software that allows phone calls over the Internet. The new company, Adir Technologies, will offer Net2Phone's network management software to telecommunications, Internet, wireless and broadband service providers. The Web-based telephoner is switching strategies after coming to the conclusion that the long distance biz is just as hard via the Internet as it is via the phone cord.

America Online (AOL Quote) was up 3.7% this morning, after it introduced an updated version of its shopping service today. It also divulged details of how much its customers spent in the second quarter. AOL said that members spent $4.9 billion shopping through the service in the period, more than double the $2.4 billion spent in the same quarter last year and up from the $3.9 billion spent during the first quarter.

Motorola (MOT Quote) was off1.1%. The company said it would increase its stake in OpenTV (OPTV Quote) by purchasing approximately 1.9 million shares held by an affiliate of News Corporation (NWS Quote). After the transaction, Motorola will own approximately 5.4 % of OpenTV, a provider of software that enables digital interactive television.

Autobytel.com (ABTL Quote) was up 3.2% after the online auto retailer said it expects third-quarter results to be slightly above the First Call/Thomson Financial two-analyst estimate calling for a 31-cent loss. Autobytel said it expects revenues to be 65% to 70% greater than the third quarter of last year.