Technology investors awaiting the crucial second financial report from Yahoo Inc. pulled the stock market out of a three-day dive today only to be blindsided by the Internet company after the bell.
Yahoo delivered profits of 8 cents a share -- precisely what analysts were predicting -- on revenues that fell a couple million dollars short of the $611 million consensus estimate.
The revenue shortfall was an unpleasant surprise and even the as-predicted doubling of profits was not what Wall Street really wanted to see.
Yahoo has a history of delivering slightly better earnings than Wall Street has been expecting, so hitting the target still missed the mark, as far as many traders were concerned.
Yahoo shares immediately plunged in after-market trading, dropping more than 10 percent in a matter of minutes and setting technology stocks up for a worrisome opening on Thursday.
Though Yahoo's own stock slipped about 1 percent during the trading day, the overall market managed to hold its ground -- no small accomplishment after the Nasdaq Stock Market composite index had fallen more than 4 percent over the three previous days.
The Nasdaq composite gained a little less than three points to 1966.08. The Standard & Poors 500 stock index picked up 2 points, closing at 1118.33. The Dow Jones industrial average gained 21 points to 10240.29.
While today's trading stopped the slide, it did not produce the big bounce that Wall Street's bulls were looking for and Yahoo added significantly to the market's worries.
Yahoo has been the leader of the technology stock rebound. The stock was up 50 percent in the second quarter. Going into Wednesday's session it was selling for 130 times earnings -- compared with 21 times earnings for the stocks in the S&P 500.
If Wall Street decides to revalue Yahoo, it is likely to revalue the entire tech sector, perhaps even the whole market.
Other technology stocks already are getting a hard look, because several big names are reporting results that mirror those of Yahoo -- good, but maybe not good enough.
After the bell today, software giant Siebel Systems Inc. warned that second quarter results would not meet expectations. Siebel shares, which had been up during the day, quickly tanked in after-hours trading, falling as much as 18 percent.
During the day PeopleSoft Inc. -- another key producer of computer programs used by businesses -- issued an earnings warning, just as Veritas Software Corp. had the day before.
Woven through all this underachievement was a theme that does not bode well for either the market or the economy. Several of the companies said they fell short of their goals for the quarter because orders that were expected to come in at the very end of the quarter failed to materialize. If that's the problem, it could signal a slowdown in the business spending that is needed to keep the economy moving ahead.