Stocks were still positive but blue chips dropped well below the 11,000 level as investors waited for computer networking giant Cisco Systems' (CSCO ) earnings report after the closing bell.
Despite a 100-basis point interest rate cut so far this year and hopes for continued aggressive rate cutting by the Federal Reserve, investors continue to feel nervous about the economy. In a light week of economic data, corporate earnings reports are the market's focus.
"I really think the large-cap, old-economy stocks are pulling the market a little more than the Nasdaq," Don Hodges of Hodges Fund, told Standard & Poor's AdvisorInsight. "The Nasdaq seems to be gyrating right now, with little general direction, whereas the Dow has shown some pretty sustained improvement."
"Although it is an area of great opportunity, it is an area of great risk," Hodges said of technology stocks.
The market is holding water today as the Street waits for Cisco's earnings announcement, which is not expected to be positive. But it is expected, at least, to fall within the Street's forecasts. Just waiting for the Cisco results pulled the Nasdaq out of its slump of the last two sessions. Tech stocks have suffered as negative reports of semiconductor makers brought the group down some 10% since Friday. Chipmakers made a comeback today, with the Philadelphia Semiconductor Index up more than 1.8%. Computer makers, biotechs, software companies and telecom firms also contributed to the tech index's gains
U.S. regulators approved JDS Uniphase Corp.'s (JDSU ) acquisition of SDL Inc (SDLI ) after the firm agreed to sell a key laser plant to Nortel Networks Corp. (NT ). All three stocks were heavily traded and gained ground.
Media and entertainment giant Walt Disney Co. (DIS ) reported fiscal first-quarter earnings of $0.16 a share, outpacing analysts' average expectation of $0.15 per share. The Dow component added strength to the blue chip index, as did technology blue chips.
Software behemoth Microsoft (MSFT ), No. 1 chipmaker Intel (INTC ) and information technology firm Hewlett-Packard (HWP ) were the biggest gainers on the Dow.
Weakness in financial stocks tempered the index's gains. Though the Dow Jones Industrial Average broke the 11,000-mark during the session, the index pared back gains to just 4.63 points, or 0.04%, at 10,970.48.
The tech-heavy Nasdaq composite index gained 31.32 points, or 1.18%, to 2,674.53, while the S&P 500, a broader stocks gauge, added 0.81 points, or 0.06%, to 1,355.12.
U.S. Treasuries were trading lower ahead of the first leg of quarterly debt refunding, which will see the auction of $11 billion of reopened five-year notes. Amid a week of light economic data, the markets are expecting data on productivity Wednesday.
Stocks in the News
Applied Micro (AMCC ), maker of semiconductors, maintains guidance for the fourth quarter and the first quarter of fiscal year 2001, but says existing orders have seen some push-outs, cancellations in past week. Given concerns that abound in its end markets, the company is on alert.
Supply chain software maker JD Edwards (JDEC ) said it sees a first quarter loss between $0.01 and $0.02 from normalized operations on $208 million to $218 million in revenues. The company blamed its poor execution in sales and services areas.
Financial services firm Bank of America (BAC ) was reportedly downgraded by UBS Warburg to hold from buy.
European markets ended the day higher. London's FTSE 100 ended up 24.20 points, or 0.39%, to 6,293.40, as investors await an interest-rate decision from the Bank of England this week. In Germany, the DAX Index finished up 64.96 points, or 0.98%, to 6,693.03, even though the German unemployment rate rose to 9.3% in December from 9.2% in November. German investors were encouraged that EuroZone retail sales rose 0.2% in November. In Paris, the CAC 40 ended up 28.86 points, or 0.50%, at 5,852.35.
Asian markets finished mixed. Japan's Nikkei index finished down 115.67, or 0.86%, at 13,269.85 while Hong Kong's Hang Seng stock finished up 82.40 points, or 1.50%, at 15,830.84.
Bush touted his $1.6 trillion tax-cut plan and weighed an estate-tax compromise. He urged cuts be retroactive to Jan.1 as an aide said Bush would consider a capital-gains tax on estates in a bid to win support for estate-tax repeal: WSJ.
Bush signaled he would sign a patients-rights bill that includes a limited right to sue HMOs. He wants to steal thunder from an expected McCain-Kennedy bill: WSJ.
Ariel Sharon appeared poised for a huge political victory over Prime Minister Ehud Barak as voters began casting ballots Tuesday in an election seen as a referendum on Israel's relationship with the Palestinians: NYT.
Israel blockaded Palestinian areas as militants vowed to turn today's election into a "day of rage" Palestinian gunfire killed an Israeli soldier on his way to vote, while troops sealed a Gaza-Egypt crossing: WSJ.
By Amy Tsao