Investors cautious after Cisco report

NEW YORK (CNNMoney.com) -- U.S. stocks looked set for a weak open Wednesday after tech bellwether Cisco Systems issued a cautious outlook, although that report was at least partly balanced by good results from Walt Disney.

About two hours before the market open, S&P and Nasdaq futures were slightly lower and pointing to a weak start for Wall Street.

Cisco (CSCO, Fortune 500) reported sales and earnings that exceeded analysts' expectations after the close Tuesday, but the computer networking leader issued a conservative sales outlook.

Walt Disney (DIS, Fortune 500) posted quarterly results after the market close Tuesday that topped expectations and suggested the entertainment giant isn't getting hit by the economic slowdown or a writers' strike. Shares of Dow component Disney surged 3.7% in early Frankfurt trading.

"Cisco's caution shouldn't catch us by surprise. It has the ability to be a bit melodramatic about the economy," said Art Hogan, chief market analyst at Jefferies & Co. "And Disney had a great quarter."

One drag for tech stocks could be comments by Microsoft (MSFT, Fortune 500) Chairman Bill Gates to reporters in Tokyo. He said his company isn't considering other deals after withdrawing its takeover offer for Yahoo (YHOO, Fortune 500).

But there was a tech deal announced early Wednesday, as Sprint (S, Fortune 500) and Clearwire (CLWR) announce the formation of a joint venture for the high-speed wireless network WiMax. The venture will see the two companies join with tech titans, including Intel (INTC, Fortune 500), Google (GOOG, Fortune 500) and some of the nation's largest cable operators, which have agreed to invest $3.2 billion in the effort. The joint venture is worth as much as $14.5 billion.

Treasury Secretary Henry Paulson gave a positive outlook for the U.S. economy, telling the Wall Street Journal in an interview published Wednesday that U.S. financial markets are emerging from the credit crunch and that "the worst is likely to be behind us."

Oil futures held near $122 a barrel in electronic trading, edging up 12 cents to $121.96 a barrel ahead of the 10:30 a.m. ET report on U.S. fuel inventories. The front-month crude contract rose to a new trading high near $123 a barrel in the previous session.

Economic news Wednesday included a 2.2% rise in first-quarter productivity that topped both forecasts and the fourth quarter gain, which was also revised higher. Higher productivity can keep the economy growing in the face of a weaker labor market without adding to inflationary pressures. Futures got a boost from the report, although they stayed in negative territory.

Due out at 10 a.m. is the National Association of Realtors' Pending Home Sales index, a measure of homes under contract, as well the forecast on home sales and prices from the trade group.

Markets could be affected by the results of the Democratic primary votes held Tuesday. Sen. Barack Obama won a decisive victory in North Carolina, while Sen. Hillary Clinton could only eke out a narrow victory in Indiana. The two votes apparently cemented Obama's status as the leader in the race for the party's nomination.

Hogan said typically stocks would be expected to get a lift from having a clearer front runner for one of the party's nominations, since it could eliminate some uncertainty in the minds of investors. But so far this year the election has had very little impact on markets, he said.

"There hasn't been a single primary where it was a market mover as yet," he said. "You'd think we'd see that, maybe now, but you can't be sure."

In global trade, Asian markets ended mixed. European stocks rose in early trading.