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Markets & Stocks
U.S. techs dip amid anxiety
August 7, 2001: 4:57 p.m. ET

Concern about the pace of an earnings and economic recovery offsets data
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. technology stocks faltered Tuesday as concern about the timing of a recovery for technology stocks grabbed investor attention ahead of a quarterly report from tech bellwether Cisco Systems.

While most expect little change, in terms of guidance, from what other tech leaders have said, investors were still hopeful that some optimistic guidance would emerge.

"Everybody's worried about it (Cisco)," said Charles Payne, president of Wall Street Strategies. "Everyone is focused on guidance. They're going to have to be able to say we're going to grow anywhere from 30-to-50 percent still and we're going to maintain some of our capital expenditures."

Shortly after the market closed, Cisco reported that its earnings fell 87 percent in the latest quarter, a result that nonetheless matched Wall Street forecasts.

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Also keeping a lid on an earlier advance on the Nasdaq were chip stocks, after Credit Suisse First Boston cut its rating to "hold" from "buy" on more than a dozen U.S. and European semiconductor companies.

But the decline lacked momentum it was the fifth-lightest trading day of 2001 on the Nasdaq a signal that investors were still unwilling to place significant bets on an economic and earnings turnaround for technology stocks.

"To say it's slow is an understatement it's really a sign that people are playing it close to the vest," Larry Lawler, head of stock trading with Dreyfus Corp, told CNNfn's Street Sweep. "I think people really want to hear what Cisco has to say."

But the Dow hung on to modest gains, led by 3M (MMM: up $1.48 to $110.85, Research, Estimates) and General Electric (GE: up $1.38 to $42.77, Research, Estimates).

The Nasdaq composite index fell 6.47 points to 2,027.79. The Dow Jones industrial average gained 57.43 points to 10,458.74, and the Standard & Poor's 500 index gained 3.92 points to 1,204.40.

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"What we've gotten, in terms of economic data and earnings, is no sense things are picking up they're (investors) afraid of another ledge to go over," Art Cashin, director of floor trading with UBS PaineWebber, told CNNfn's The Money Gang.

Market breadth was mixed on volume that continued to be tepid. Nasdaq losers topped winners 1,937 to 1,730 on volume of 1.29 billion shares. On the New York Stock Exchange, advancers beat decliners 1,702 to 1,386 as 970 million shares changed hands.

"While I applaud the resiliency, you can still see via the volume that there is not widespread conviction," Payne said.

In overseas stock markets, Europe's slipped while Asia's finished mixed. Treasury securities were mixed. The dollar rose against the euro but was little changed versus the yen.

Cisco prompts caution

After the market closed, Cisco Systems (CSCO: down $0.28 to $19.26, Research, Estimates), the No. 1 maker of Internet routing equipment, posted its quarterly results, notching earnings of $163 million, or 2 cents a share, in its fiscal fourth quarter ended July 28 excluding one-time charges. That compared with an operating profit of 16 cents a share a year earlier.

Investors were geared up to digest the company's guidance. "Cisco almost needs something really strong they're going to have to talk about visibility and they're going to have to do it somewhat with numbers," Cashin said.

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Investor conviction was somewhat tepid as the focus has started shifting beyond corporate results toward the economy. Market participants are looking for any signs of stability to give a reason for money to move off the sidelines.

"We're keeping our fingers crossed that we'll continue to see signs of (economic) stabilization," said Art Hogan, chief market strategist with Jefferies & Co. "The economy is key and will be the catalyst to get people off the sidelines."

Investors have been looking for reasons to come back into the market after being swamped by a deluge of bad news, but they remain unconvinced that the time has come.

"I think the market is searching for any good news it can find but the gloom is so thick out there," Jon Burnham, chairman and CEO of Burnham Securities, told CNNfn's The Money Gang. "The market's in a narrow range but my guess is we are bouncing around the bottom."

A government report that showed improving productivity injected life into the major U.S. stock indexes in the early part of the session, but the potential rally lost steam by midsession.

Yet, U.S. worker productivity rose at a 2.5 percent annual rate during the second quarter, according to the Labor Department, a better-than-expected number that offered up a possible sign of strength for the economy.

Chips temper optimism

Credit Suisse First Boston issued a downgrade of chip and chip equipment stocks, cutting 15 U.S. and European-based companies to "hold" from "buy," citing poor fundamentals and advising investors to take profits.

The Credit Suisse call came one day after Lehman analyst Dan Niles said he expects Intel (INTC: up $0.34 to $30.62, Research, Estimates) to implement an aggressive price cutting move Aug. 26 in an attempt to raise the stakes in its war with Advanced Micro Devices (AMD: down $0.07 to $17.55, Research, Estimates).

In tandem with Lehman's note, U.S. Bancorp Piper Jaffray and Salomon Smith Barney cut its earnings estimates for Intel.

Among the losers in the chip sector were Altera (ALTR: down $0.41 to $31.51, Research, Estimates), Applied Micro Circuits (AMCC: down $0.66 to $18.28, Research, Estimates), Atmel (ATML: down $0.48 to $10.00, Research, Estimates), and Applied Materials (AMAT: down $1.93 to $46.80, Research, Estimates).

The Philadelphia Stock Exchange's Semiconductor Index, or Soxx, fell 22.88 points to 608.67.

Semiconductor stocks led the broader market higher last week, and analysts were not surprised to see them exert a downward influence amid negative outlooks.

Grab bag of quarterly results

Consumer products maker Procter & Gamble (PG: down $0.14 to $70.61, Research, Estimates) beat Wall Street's fiscal fourth-quarter estimates for earnings excluding special items, and said fiscal 2002 earnings are tracking below its double-digit earnings growth target.

Conseco (CNC: down $2.50 to $11.70, Research, Estimates) reported a second-quarter profit, reversing a year-earlier loss and edging past Wall Street forecasts, but the insurer and financial services company lowered its earnings guidance for the remainder of the year.

MetLife (MET: down $0.27 to $29.05, Research, Estimates), the No. 1 U.S. life insurer by premiums, reported second-quarter earnings that edged past Wall Street estimates, as its institutional business continued to support its other struggling businesses.

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Drugmaker Barr Laboratories (BRL: up $2.96 to $81.91, Research, Estimates) more than doubled its fiscal fourth-quarter earnings Tuesday, yet just missed Wall Street estimates as it took a charge related to legal action.

Zale (ZLC: down $0.71 to $31.18, Research, Estimates), the largest U.S. jewelry chain, said its fiscal fourth-quarter profit fell far short of Wall Street estimates on a 9.7 percent decline in same-store sales at outlets open at least a year in the quarter. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.