Cisco’s Poor Showing Helps Trip Nasdaq; Dow Slips Too
Technology stocks pushed the Nasdaq to its lowest level in nearly a month Wednesday after Cisco Systems became the latest victim of the slowdown gripping the high-tech industry.
Cisco, the world’s largest maker of computer networking equipment, sent a shiver through the market after it missed Wall Street’s expectations for the first time in more than six years and warned that a slowdown could continue for the next two quarters.
“Maybe Cisco, as the Holy Grail of the tech stocks, is going to be representative of what some of the major tech stocks are headed for,” said Tom Sparico, managing director of equities at Bengal Partners.
The Nasdaq composite index fell 56.67 points, or 2.1%, to 2,607.82. It was the technology-dominated index’s lowest close since Jan. 10.
The Dow Jones industrial average lost 10.70 points, or 0.1%, to end at 10,946.72. Computer maker Hewlett-Packard, down 80 cents at $36, and Intel, off 50 cents at $34.94, weighed on the blue-chip gauge.
The broader Standard & Poor’s 500 index fell 11.37 points, or 0.8%, to 1,340.89.
Losers outnumbered winners 11 to 7 on Nasdaq, while winners led losers 8 to 7 on the New York Stock Exchange. Volume was active.
Cisco dropped $4.69 to $31.06 in frenzied trading after earlier touching an 18-month low at $29.88. More than 280 million shares changed hands, the second-highest one-day volume in Nasdaq history.
“Cisco missed and everything fell in concert,” said Larry Wachtel, analyst at Prudential Securities. “Now I think there’s growing awareness that these big, high-valuation stocks are not going to come roaring back again.”
The selling had a domino effect on other networking firms. Juniper Networks skidded $7.81 to $94.38, Sycamore Networks dropped $3.31 to $23.69, Nortel Networks shed $2.42 to $33.09 and Extreme Networks fell $4.44 to $31.69.
Companies that make the chips used in networking equipment also were battered. Broadcom skidded $9.69 to $82.81, PMC-Sierra fell $7.81 to $58.75 and Applied Micro Circuits sank $5.25 to $49.81.
Investors’ worries about earnings infected the broader technology sector as well. EMC, the world’s No. 1 data-storage company, fell $4.61 to $65.39.
But the Nasdaq, which had dropped more than 4% earlier in the day, pared its losses late in the trading session and left some investors with hope that the technology measure had hit bottom.
“It’s a negative day, but it could have been much worse, and you are seeing some stocks buck the trend,” said Peter Coolidge, a managing director of equity trading at Brean Murray & Co. “It shows there is still some interest in Nasdaq and tech stocks, but it’s really a buyer’s market.”
“Old-economy” stocks that gained as techs fell included Anheuser-Busch, up $1.35 to $42.05 after reporting earnings; Procter & Gamble, up $1.07 to $75.19; and shoemaker Skechers USA, up $2.16 to $29.91.
Some insurance stocks rallied sharply. Progressive surged $5.06 to $101.51, Chubb rose $1.61 to $75.61 and Hartford Financial jumped $3.16 to $65.55.
Safeco rose 13 cents to $25.63. But after the market closed, the troubled insurer said it cut its quarterly dividend 50% to 18.5 cents a share.
Oil prices soared 92 cents to $31.27 a barrel in New York, partly because the election of arch-hawk Ariel Sharon as Israel’s next prime minister is expected to complicate peace efforts in the Middle East.
Treasury yields were mixed as some investors made way for $10 billion in 30-year bonds, which will be sold today in the last day of the Treasury’s three-part, $32-billion quarterly refunding of debt. In the second day of its quarterly refunding, the Treasury sold $11 billion of 10-year notes Wednesday at a yield of 5.07%, the lowest in two years. The five-year T-note yield rose to 4.91% from 4.88% on Tuesday. The 30-year T-bond edged up to 5.54% from 5.50%.
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Market Roundup, C7, C8
