Cisco Results Loom Large Over Stock Market

Tech strength was seen in the Dow and Nasdaq ahead of Cisco's influential earnings report and outlook

Stocks were higher for most of the day, and the Nasdaq held on, but blue chips ended lower as the market headed toward computer networking giant Cisco Systems' (CSCO ) earnings announcement, due out after the bell.

All eyes were glued to the pending announcement from Cisco, which was not expected to be positive. The company is expected to post a profit of 19 cents per share, or roughly $1.4 billion, up from $935 million, or 13 cents a year ago, according to First Call/Thomson Financial.

"Cisco has become a very telltale sign of where tech is headed," said Larry Lawler, head of stock trading at Dreyfus Corp., noting the company's health leads the market's direction much the way IBM did years ago.

"Good numbers will help the market a lot. Anything neutral to on the light side could have negative effect." Either way, Cisco's earnings and outlook will have an impact on stocks, given many second and third tier technology companies depend on it for revenues, Lawler said.

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 were on a comeback today. The Philadelphia Semiconductor Index finished up under 1% after a bout of profit-taking trimmed gains in the group.

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.

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 ).

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 for most of the day, 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 hindered the Dow. The Dow Jones Industrial Average broke the 11,000-mark during the session, but the index finished off 8.43 points, at 10,957.42.

The tech-heavy Nasdaq composite index finshed up 21.28 points, or 0.8%, to 2,664.49, while the S&P 500, a broader stocks gauge, lost 2.05 points, or 0.1%, to 1,363.55.

Treasury Market

U.S. Treasuries ended 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 a report 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.

World Markets

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.

Today's Headlines

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

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