Techs Shrug Off Cisco Warning

Techs shrug off Cisco warning

Nasdaq recovers after opening in the red

By Julie Rannazzisi,
Last Update: 10:19 AM ET Apr
17, 2001

NEW YORK (CBS.MW) – After an initial slump at the open, the Nasdaq
turned higher in a swift move, managing to dismiss an earnings warning
from Cisco Systems.

Even Cisco and the entire networking sector came well off session
lows and was barely negative in recent action. Among the tech groups
spearheading the advance were chip, software and Internet issues.

In the broad market, drug, utility, biotech and brokerage issues
climbed while oil, oil service, paper, chemical and gold issues fumbled.

The Dow Jones Industrial Average ($DJ) erased 23 points, or 0.2
percent, to 10,134.

The Nasdaq Composite ($COMPQ) added 17 points, or 0.9 percent, to
1,927 while the Nasdaq 100 Index ($NDX) rose 25 points, or 1.6 percent,
to 1,676.

The Standard & Poor’s 500 Index ($SPX) edged up 0.3 percent while
the Russell 2000 Index ($RUT) of small-capitalization stocks added 0.4

Volume came in at 175 million on the NYSE and at 385 million on the
Nasdaq Stock Market. Market breadth turned positive, with advancers
beating out decliners by 13 to 12 on the NYSE and by 15 to 14 on the

Specific movers

Cisco Systems (CSCO) fell 2.2 percent. The networking behemoth
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 the shortfall 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.

In the meantime, Yahoo (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. Shares fell 2.7 percent.

Dow companies report

A number of Dow stocks posted their results on Tuesday.

Johnson & Johnson (JNJ) reported a 14.2 percent increase in net
earnings. The company posted a profit of $1.06 a share, beating the
First Call estimate by two cents. The stock added 0.7 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 in the year ago period. Shares shed 0.3 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 outlook 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 last year. The stock edged down 0.7

Finally, Eastman Kodak (EK) said it 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. The stock slumped 3.9 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

"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

In the currency arena, dollar/yen erased 0.5 percent to 123.74 while
euro/dollar dropped 0.9 percent to 0.8806.

Julie Rannazzisi is markets editor for in New York.

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