Stocks fall, tech shares drop sharply on fears about Cisco

Tuesday, April 9, 2002

AP Business WriterNEW YORK (AP) -- Investors sold technology shares sharply lower Tuesday amid rumors that Cisco Systems will be the next company to warn of weaker profits. Blue chips also fell, compounding losses ran up Monday after IBM reduced its earnings outlook.

"You have a market that is really hard pressed to mount an offensive," said Bryan Piskorowski, a commentator at Prudential Securities, noting that first-quarter earnings are just now trickling in, and that investors won't start hearing from most big companies until next week.

It was the second time tech investors were worried about the possibility of an earnings warning. On Friday, tech shares fell on rumors of an IBM warning -- which the computer company made Monday, forecasting weaker-than-expected first-quarter profits and revenue.

The Dow Jones industrial average ended Tuesday down 40.41, or 0.4 percent, at 10,208.67, according to preliminary calculations. On Monday, the blue chip index recovered from a 150-point caused by IBM's news and closed just 22.56 lower.

The broader market recorded steeper losses. The tech-dominated Nasdaq composite index fell 43.36, or 2.4 percent, to 1,742.51, having advanced 15.84 Monday despite IBM's warning. The Standard & Poor's 500 index declined 7.50, or 0.7 percent, to 1,117.79.

Investors have been selling stocks for three weeks due to their qualms about earnings and the economy and concerns about the Mideast conflict.

Analysts said there's little reason to buy, although there has been sporadic bargain hunting as stock prices have fallen to more attractive levels. For investors to commit to the market, they need companies to report solid first-quarter earnings and they must hear more positive assessments of future results.

"We are starting to move to better results but that takes time," said Brian Belski, fundamental market analyst at US Bancorp Piper Jaffray, adding that investors will continue to be cautious until earnings show definite improvement. "People want to be able to reach and touch those results to make sure they are real."

Cisco Systems fell $1.36 to $14.82 after RBC Capital Markets lowered its third-quarter estimates on the networking stock, citing a continued slump in capital spending on information technology. Later in the session, rumors spread on Wall Street that Cisco would be the next big tech company to warn about profits.

Other tech losers included Microsoft fell $2.35 to $54.87, and Intel declined $1.47 to $28.46. Yahoo! stumbled 38 cents to $18.46 ahead of its earnings due out Wednesday.

But Dow industrial IBM rose 33 cents to $87.74, a meager recovery from Monday's $9.84 loss.

Among Tuesday's winners, Wendy's gained $1.36 to $37.30 after raising its fiscal 2002 earnings estimate. Lehman Brothers, Goldman Sachs and Credit Suisse First Boston also raised various earnings estimates for the fast-food company.

Positive growth prospects boosted Wal-Mart, up 32 cents at $60.10. Salomon Smith Barney said it expects the retailer to record 13 percent profit growth over the next three to five years. The brokerage on Tuesday initiated coverage of the retailing stock with a "buy" rating.

Advancing issues outnumbered decliners 17 to 14 on the New York Stock Exchange. Volume was light at 1.21 million shares, but ahead of Monday's 1.10 billion.

The Russell 2000 index, the barometer of smaller company stocks, finished Tuesday unchanged at 503.01.

Overseas, Japan's Nikkei stock average finished Tuesday down 2.1 percent. In Europe, France's CAC-40 rose 0.7 percent, while Germany's DAX index and Britain's FT-SE 100 were essentially unchanged.

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