Despite Cisco's Dire News, Stocks Close Higher

Investors looked past an earnings warning from the tech bellwether. Hopes are growing that the market is bottoming

Hoping the market may finally be treading bottom, investors looked past an earnings warning and layoff announcement from Cisco Systems (CSCO ) to help stocks finish higher Tuesday.

The high-tech bellwether was among a long list of companies warning of lower profits, amid a slowing U.S. economy. After the closing bell Monday, Cisco -- which makes products that power the Internet -- said it expects third quarter revenues to be down 30% from $6.7 billion the company posted in the second quarter, and added it sees earnings per share on a pro forma basis in the "very low" single digit range. The company also announced plans to cut its workforce by 8,500. Cisco shares ended down more than 3%.

Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum partially attributed the lack of a tech sell-off to a short-covering rally, as investors began to re-enter the market believing a bottom is near.

"I'm leaning toward the sense that the worst is over," Bob Lee, manager of Sentinel: Mid Cap Growth Fund/A, told Standard & Poor's research unit. Lee sees positive signs in higher industrial production, lower inventory levels, and moderate inflation. Overall, Lee thinks it's "encouraging that the economy is growing faster than expected."

The Dow closed up 57.84 points, or 0.57%, to 10,216.40. Blue-chip gains were tempered by Eastman Kodak (EK ), which reported first-quarter profits fell sharply due to the sluggish economy. The company also said it will cut at least 3,000 jobs and expects to take a pre-tax charge of $375 million to $450 million, mostly in the second quarter. Shares of Eastman Kodak finished down more than 2%.

The Nasdaq Composite Index, meanwhile, ended down 13.50 points, or 0.71%, to 1,923.07. The broader S&P 500 gained 12.12 points, or 1.03%, to 1,191.80.

Treasury Markets

Treasuries ended higher. In economic news, the Labor Department reported U.S. consumer prices rose slightly in March, in line with expectations. The Consumer Price Index, the main gauge of U.S. inflation at the consumer level, rose 0.1%, while the closely watched "core" index, which strips out volatile food and energy costs, rose 0.2%. And the Commerce Department said U.S. housing starts fell 1.3% to a seasonally-adjusted annual rate of 1.613 million units after posting a 2.2% fall in February.

Additionally, the Federal Reserve said a rebound in activity at auto factories helped U.S. industrial production post its first gain since September. Production in March rose 0.4%, surpassing analysts' expectations of a slight decline and providing a bright spot in a generally dim manufacturing sector. The amount of capacity in use at the nation's factories, mines and utilities also rose, climbing to 79.4%.

Stocks in the News

Yahoo Inc. (YHOO ) says it will appoint Terry S. Semel as new chairman and CEO, effective May 1.

Computer Associates (CA ) reported it expects $0.47 fourth quarter earnings per share from operations on $1.44 billion in revenues.

Airborne Inc. (ABF ) expects first quarter results to be toward the larger end of analysts' estimates of a $0.15-$0.36 per share loss on lower than expected domestic shipment growth, and shift in mix of business.

World Markets

European markets closed lower, amid weakness in technology. In London, the Financial Times-Stock Exchange 100 index ended down 5.50 points, or 0.10%, to 5761.10. In Germany, the DAX Index finished lower by 67.72 points, or 1.11%, to 5,935.58. In France, the CAC 40 closed down 31.73 points, or 0.59%, to 5340.98.

In Asia, the markets ended down. The Nikkei lost 187.80 points, or 1.42%, to 13,067.09, amid weakness in NTT Docomo and chips. In Hong Kong, the Hang Seng ended down 383.02 points, or 2.95%, to 12,606.45.

By Alan Hughes and Heesun Wee in New York

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