M A R K E T .. S N A P S H O T -- 11:55 Investors cautious, averages steady
Cisco impact muted; techs trade mixed
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 11:55 AM ET Apr 17, 2001
NEW YORK (CBS.MW) - The stock indexes hovered close to the flat line Tuesday, trading in a choppy fashion as investors pondered a profit warning from Cisco Systems as well as an onslaught of quarterly results.
The impact from Cisco hurt networking stocks but didn't have widespread repercussions in the tech arena. In fact, software and Internet stocks traded higher while chip stocks slumped after witnessing earlier gains.
"Stocks appear to be reacting less to any bad news that comes out, which is an indication that the number of sellers who are looking for reasons to sell may be close to exhausted. This leaves stocks in a position to move higher without as much of a volume push." observed Dain Rauscher's Robert Dickey.
"The markets have worked their way back to more neutral technical positions after being deeply oversold for extended periods," he added.
In the broad market, drug, utility, biotech and brokerage issues climbed while paper, chemical and gold issues fumbled. Check the latest market stats.
The Dow Jones Industrial Average ($DJ) climbed 4 points to 10,163.
Leading on the upside were shares of IBM, SBC Communications, Citigroup, Hewlett-Packard, Home Depot, Microsoft and Johnson & Johnson. Among the blue-chip barometer's downside movers were Eastman Kodak with a 5.7-percent loss, Procter & Gamble and AT&T.
The Nasdaq Composite ($COMPQ) added 3 points, or 0.1 percent, to 1,913 while the Nasdaq 100 Index ($NDX) rose 9 points, or 0.6 percent, to 1,659.
The Standard & Poor's 500 Index ($SPX) rose 0.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks added 0.4 percent.
Volume came in at 463 million on the NYSE and at 890 million on the Nasdaq Stock Market. Market breadth turned positive, with advancers beating out decliners by 16 to 12 on the NYSE and by 17 to 16 on the Nasdaq.
Cisco's bad news
Cisco Systems (CSCO) fell 4.9 percent to $16.37 after falling as low as $15.37 in intraday action Tuesday. Other networking stocks took Cisco's warning in stride while the Amex Networking Index ($NWX) remained volatile, slipping 0.9 percent.
Rival Juniper Networks was a big upside mover, adding 4.2 percent in recent action.
Cisco announced after the close Monday that it expects revenue for its fiscal third quarter to be down approximately 30 percent from the second quarter and sees earnings per share in the "very low, single-digit range." First Call/Thomson Financial had expected EPS of 8 cents. The shortfall was blamed on "continued global economic challenges, the slowdown in the global telecom market, and the deceleration in corporate IT spending." Cisco also announced a reduction of 8,500 in its work force, about 500 more than the scenario presented by the company in early March.
SG Cowen said that while uncertainty still remains with respect to the duration of the slowdown in customer spending and the timing of a recovery, it believes the bottom is close.
Cowen said it believes Cisco has the unique opportunity to restructure, prune its business units to be leaner and more competitive and refresh its product portfolio. "Other companies with fewer resources and more concentrated customer bases may have a more difficult time competing if Cisco leverages this transition properly. Cisco's stock may remain in a narrow trading range as these issues sort themselves out," Cowen concluded.
While Cisco is the electronics manufacturing services industry's most significant customer, the group took the bad news in stride.
UBS Warburg said first-tier EMS companies with the most exposure to Cisco as a percent of sales in the most recent quarter are Jabil Circuit (JBL) at 20 to 25 percent and Solectron (SLR) at 15 percent. Warburg said Cisco also does a significant amount of business with Sanmina, Flextronics and Celestica. Jabil climbed 6.3 percent, Solectron 4.2 percent and Flextronics 6.3 percent.
"With both Jabil and Solectron already having reported we think the weak results for Cisco's April quarter are likely already forecasted in our estimates. Overall, we continue to believe that the environment for the EMS stocks will be difficult until investors get better sense as to the timing of the improvement in the end markets," Warburg told clients in a research note.
Tech gyrations
Net stocks swelled as they pondered news from Yahoo. The portal giant (YHOO) tapped Terry Semel, former Warner Bros. CEO, for the post of chairman and chief executive officer. Former CEO Tim Koogle will be named vice chairman, a transitional role he's expected to retain until August. Koogle will then remain on Yahoo's Board of Directors. Yahoo shares added 0.5 percent, erasing earlier losses. Among other stocks in the group, Amazon gained 4.7 percent and AOL Time Warner, which will report its quarterly results on Wednesday, ascended 3.7 percent.
Telecom stocks were held hostage by a slump in Sprint shares following the company's earnings warning. Sprint (FON) posted a profit of 36 cents in its first quarter, missing the First Call estimate by a penny. In addition, the telecom concern trimmed earnings projections due to the economic slowdown. In the second quarter, earnings are projected to end up "in the low 30-cent range." That compares to the 38 cents that First Call had expected the company to earn. Sprint fell 4.3 percent while AT&T slipped 2.2 percent.
Wireless telecom stocks took a hit, with Ericsson (ERICY) pacing declines with a 6.5 percent loss. The Financial Times reported that Ericsson is set to cut at least another 6,000 jobs this week. Nokia lost 5.2 percent.
Dow companies report
A number of Dow stocks posted their results on Tuesday.
Eastman Kodak (EK) was the Dow's sour spot, dropping 5.7 percent. The company made a profit from operations of 54 cents in the first quarter, ahead of the 51 cents a share that Wall Street had expected. But the company said it was withdrawing its earnings-per-share target for the year of $4.50-$4.90, indicating it's not prudent to provide guidance beyond the second quarter with uncertainty in the economic outlook. The company said it plans to cut 3,000 to 3,500 jobs worldwide.
Johnson & Johnson (JNJ) reported a 14.2 percent increase in net earnings, posting a profit of $1.06 a share, beating the First Call estimate by two cents. The stock rose 2 percent.
Philip Morris (MO) announced a profit from operations of 95 cents a share, a penny ahead of the First Call estimate and ahead of the 87 cents earned in the year ago period. Shares advanced 0.9 percent.
And Caterpillar (CAT) registered first-quarter earnings of 47 cents a share, missing the Wall Street consensus estimate by a penny. The company reaffirmed its view that full-year 2001 sales and revenue would be flat compared to last year's levels while profit would drop roughly 5 to 10 percent from 2000. The stock edged down 0.8 percent.
Treasury and data focus
Not surprisingly, Treasury prices reasserted themselves after retreating substantially on Monday.
In economic news, the March consumer price index rose by an as-expected 0.1 percent overall while the core, which excludes the often jumpy food and energy components, added 0.2 percent, as had been expected.
"As expected, the headline CPI was held down by a 3.7 percent drop in gasoline prices. Natural gas prices fell too, by 2.1 percent, offsetting a 0.5 percent rise in electricity prices. The April numbers will look very different, with gasoline prices likely to rebound strongly," commented Ian Shepherdson, chief U.S. economist at High Frequency Economics.
In other news, March housing starts fell 1.3 percent to a 1.613 million rate vs. the 1.63 million rate that had been expected. And building permits shed 3.6 percent to a 1.615 million rate.
And March industrial production rose by a surprising 0.4 percent vs. expectations for a 0.1 percent decrease. And capacity utilization rose to 79.4 percent from the previous month's 79.3 percent. and view Economic Preview and economic calendar and forecasts.
"Car companies appear now to be happy with their inventory levels after cutting production hard in the fourth quarter last year. Note that production cannot keep rising at this pace with sales essentially flat. Ex-autos, manufacturing output was unchanged," Shepherdson said.
The 10-year Treasury note was up 7/32 to yield ($TNX) 5.225 percent while the 30-year government bond added 10/32 to yield ($TYX) 5.67 percent.
In the currency arena, dollar/yen erased 0.5 percent to 123.74 while euro/dollar dropped 0.7 percent to 0.8818. |
