Stocks drop amid Cisco's earnings forecast

Journal Record, The (Oklahoma City), May 10, 2001

NEW YORK (AP) -- Wall Street pulled back Wednesday as investors, reacting to a cloudy earnings forecast from Cisco Systems, sold off technology and some blue chip shares.

Analysts also attributed the decline to expected profit-taking from April's big advance, as well as the lack of any compelling reason to buy.

The Dow Jones Industrial Average closed down 17.05 at 10,866.46, according to preliminary calculations, coming back from an 80-plus point deficit earlier in the session. The index has closed lower five of the last six sessions.

The loss was more pronounced in the technology-focused Nasdaq Composite index, which dropped 42.15 to 2,156.62. The Standard & Poor's 500 index slipped 5.66 to 1,255.54.

Trading was choppy as investors unloaded stocks to lock in profits from the recent run-ups in technology and other sectors, but hesitated to make any bigger moves.

"The fundamental outlook remains murky, the outlook for second quarter earnings remains murky. The cup's half-full because the market's holding, but those who say the cup's half-empty wonder what's going to drive the market higher?" said Larry Wachtel, market analyst at Prudential Securities. "You have a stalemate here."

Much of the selling appeared related to Cisco, which reported earnings slightly ahead of reduced expectations late Tuesday but failed to indicate if and when a turnaround might occur. Many were looking to the tech bellwether for indications that business was improving. The stock fell $1.28 to $19.09.

The weakness in technology also weighed down the Dow, where Intel tumbled $1.63 to $29.85, a 5 percent loss. Intel wasn't helped by news that Microsoft is waiting until October roll out its latest version of the Windows operating system, Windows XP -- after the back- to-school buying season.

Non-technology issues had a more mixed day. General Electric's news that it would report earnings "solidly above" $1.45 a share initially sent the stock higher, but it ended the session down 5 cents at $49.43. Analysts surveyed by Thomson Financial/First Call were expecting $1.47 per share.

Retailers also struggled to keep up on worries the sector will be hurt by the sluggish economy. Home Depot slipped $1.50 to $48.51, while Wal-Mart dropped 39 cents to $51.59.

The few bright spots included Alcoa, up $1.04 at $41.38, and Procter & Gamble, rising $1.71 to $66.19.

Analysts said Wall Street's cautious mood is likely to persist.

Federal Reserve officials are widely expected to lower interest rates for the fifth time this year on May 15, but, beyond that, incentives to buy may be scarce. With companies like Cisco still unable to project when business will improve, corporate profits are unlikely to provide a catalyst anytime soon.

"The market is going to move higher but we're not seeing the kind of rocking-and-rolling news that's going to make it shoot up," said John Forelli, portfolio manager at Independence Investment. "We're going to have to be patient and see the market improve as the economy does. And that's going to take months."

Still, weak earnings didn't always translate into punishment Wednesday. National Semiconductor ended the session unchanged at $25, despite reducing quarterly estimates and announcing 1,100 job cuts, or 10 percent of its work force.

Advancing issues led decliners 8 to 7 on the New York Stock Exchange. Volume came to 1.04 billion shares, compared with 990.36 million Tuesday.

The Russell 2000 index fell 1.59 to 490.18.

Overseas, Japan's Nikkei stock average fell 1.4 percent. Germany's DAX index slid 0.7 percent, Britain's FT-SE 100 was up 0.1 percent, and France's CAC-40 was off 0.5 percent.