Computer-networking stocks fell Wednesday in reaction to a downbeat outlook from Cisco Systems, leader of the sector.
Cisco, a high-profile tech stock believed by many analysts to be the next candidate to join the Dow Jones industrial average, has fallen more than 60 percent since its peak last March. On Wednesday, it shed $4.69, or 13.1 percent, to $31.06.
Karen McGrath, manager of the Strong Blue Chip 100 fund, said Cisco’s report validates the view that the earnings shortfall in the technology and telecommunications sectors is not over.
“We’ve got another quarter of probably disappointing earnings,” she said. On the other hand, “the time to have been really worried was 12 months ago. This is not the time to get really panicked.”
Overall market reaction to Cisco’s quarterly report late Tuesday was muted.
A surprisingly strong report on labor productivity in the fourth quarter generated optimism that the long-term outlook for the U.S. economy remains bullish.
Consumer credit rose by just $3 billion in December, much less than economists expected.
The number indicates consumer retrenchment but also signals that consumers are not tapping their credit cards to make it through harder times.
Treasury Secretary Paul O’Neill told Cable News Network that he saw no reason to believe the U.S. economy was contracting.
The Dow Jones industrial average slipped 10.70 points, to 10,946.72, on New York Stock Exchange volume of 1.14 billion shares. Winning stocks outnumbered losers by a narrow 8-7 margin among NYSE-listed stocks.
Despite Cisco’s disappointing results and outlook, International Business Machines and Microsoft, two computer-technology stocks in the Dow Jones industrial average, posted solid gains.
The Nasdaq composite index closed down 56.67, or 2.1 percent, to 2607.82, a partial recovery from an earlier loss of more than 109 points. Nasdaq volume was 2.06 billion shares, and losers topped winners by an 11-7 margin.
The struggling market for initial public offerings of stock could get a boost soon. Lucent Technologies said it would sell 370.3 million shares of its Agere Systems optical component unit at a price between $15 and $20 a share.
At the high end of the range, the $7.4 billion IPO would be the second-largest ever, after the $9 billion AT&T Wireless offering.
Treasury securities eased after the government sold $11 billion of 10-year notes at a yield of 5.07 percent. The government will sell $10 billion of 30-year bonds Thursday.
Local news: Natural gas distributor Peoples Energy, Chicago, boosted its quarterly cash dividend to 51 cents a share from 50 cents, payable April 13 to shareholders of record March 22.
Peoples Energy spurted more than $10, to nearly $47, in November and December as the hard winter set in. But the stock has fallen almost 14 percent this year, closing Wednesday at $38.55, up 94 cents.
– Chicago-based insurer Unitrin increased its quarterly dividend to 40 cents a share, up from 37.5 cents, payable March 2 to shareholders of record Feb. 19. Shares added 69 cents, to $38.
– Shares of Nanophase Technologies, Romeoville, which develops nanocrystalline materials for industrial applications, sank 21 percent, to $9.56. The company said first-quarter results will not meet market expectations, citing a postponement of orders.
– Shares of electronic circuit board-maker M-Wave, Bensenville, climbed 16 percent, to $11.37. Chief Executive Joseph Turek said that, despite a slowing U.S. economy, first-quarter revenues should hold steady at $20 million to $30 million, compared with $22 million in the fourth quarter.
– General Growth Properties, a Chicago-based real estate investment trust, dropped $2.08, to $34.38, after Salomon Smith Barney withdrew its “buy” rating. The brokerage firm cited disappointing fourth-quarter results.
– Financial services holding company Conseco, based in Carmel, Ind., fell more than 5 percent, to $14.79, after Fortune magazine reported on its Web site that billionaire investor Warren Buffett had not purchased Conseco bonds last year. In late December and throughout January, Conseco stock surged to more that $18 a share after The Wall Street Journal reported Buffett had bought Conseco bonds. In a statement on behalf of Buffett, a Fortune spokeswoman told Reuters that the Fortune report was correct.
