DENISE DUCLAUX, New York | Wednesday
TECHNOLOGY stocks fell to session lows at midday on Tuesday as investors speculated over the next earnings shock after a surprise warning from International Business Machine Corp. a day ago.
Blue chips eked out slim gains after a bullish outlook on Eastman Kodak Co. lifted the photo giant more than 6 percent, but caution gripped Wall Street ahead of next week’s rush of corporate earnings reports.
Unconfirmed rumours swirled among traders that Cisco Systems Inc., the world’s number one maker of gear that powers the Internet, would warn its quarterly earnings would land short of estimates. Tensions have been running high after IBM unleashed its first warning in more than a decade on Monday.
”There is an unspecified rumour of Cisco pre-announcing that is putting a drag on the stock and it’s not helping the rest of the tape,” said Keith Brickman, head of Nasdaq trading at Morgan Stanley.
The blue-chip Dow Jones Industrial Average gained 35 points, or 0.35%, to 10,284. The technology-packed Nasdaq Composite Index lost 22 points, or 1,27%, to 1,763. The broad Standard & Poor’s 500 Index edged down 2 points, or 0,21%, to 1,122.
”People are just exhausted and frustrated, because they can’t seem to get any traction,” said Noah Blackstein, a portfolio manager at Dynamic Power American Fund, with $230-million in assets. ”We go two steps forward and two steps backward, and it’s been going on for over two years now.”
Cisco dropped more than 6 percent, or $1.13 to $15.05, hitting a five-week low and ranking as the most active stock on the Nasdaq. The technology heavyweight was the biggest percentage loser in the Morgan Stanley High Tech index of 35 companies.
A Cisco representative said the company does not comment on rumours and speculation.
One analyst thought Cisco’s drop may be the result of IBM showing weakness in the big corporate market and a weak revenue outlook from telecom gear maker Nortel Networks Corp.
Winners beat out losers on the New York Stock Exchange by a ratio of 17 to 12. The number of advancing stocks matched declining stocks on Nasdaq. More than 620-million shares changed hands on the New York Stock Exchange, and more than 845-million on Nasdaq in active trading.
Investors are hungry for further clues on the health of corporate profits in the technology sector after conflicting outlooks from Compaq Computer Corp. and IBM.
Compaq, the world’s number two personal computer maker, said it would meet or top analysts’ estimates. Compaq rose 5 cents to $9.64 and ranked as the second-most active stock on the Big Board. Compaq plans to merge with computer maker Hewlett-Packard Co. in what would be the largest technology deal ever. HP, a Dow component, climbed 64 cents to $17.76.
Its upbeat forecast flies in the face of Monday’s warning by IBM of a revenue and earnings shortfall. IBM edged up 51 cents to $87.92, after slumping more than 10% on Monday. IBM blamed soft results on technology spending cutbacks by businesses. Its warning triggered an early sell-off on Monday, but the market struggled back to finished mixed.
Oil prices eased after the Israeli army pulled out of two West Bank cities. But the situation remained heated as Israel defied intense U.S. pressure by raiding more Palestinian areas. Oil prices have surged in past weeks on worries the conflict will spread across in the oil-rich Middle East.
Nortel, one of the world’s biggest makers of telecom gear, inched up 10 cents to $3.68 and was the most active on the Big Board. The company said quarterly revenue would come in below expectations as customers cut back on spending in the sagging telecoms sector. Nortel has fallen to its lowest levels in nearly seven years during the past few days.
Oil stocks tracked oil prices lower. Exxon Mobil Corp., the world’s largest publicly traded oil company, lost 45 cents to $42.79, pressuring the Dow. Deepwater drilling company Transocean Sedco Forex Inc. slipped 54 cents to $32.21.
Eastman Kodak rose $1.96 to $33 on signs the camera and film maker is recovering from a demand slump spurred by the weak economy and the Sept. 11 attacks. Late on Monday, Salomon Smith Barney upgraded the stock to ”outperform” from ”neutral.”
Microchip Technology Inc., a maker of semiconductors and control devices, rallied $3.15 to $44.50. The company said quarterly net sales and earnings should top its guidance last month due to improving order visibility and bookings. – Reuters