Weak Cisco outlook hammers stocks

The Nasdaq dives after Cisco's full-year sales forecast disappoints investors. G-20 leaders are likely to discuss currency issues as they begin a 2-day summit. Oil and gold prices gain.

By TheStreet Staff Nov 11, 2010 9:00AM

TheStreetArrow © Cory Docken/JupiterimagesBy Melinda Peer, TheStreet

 

Updated at 1:40 p.m. ET

 

Technology stocks were dragging the market down after a weak outlook from Cisco Systems (CSCO) raised concerns about tech spending.

 

At 1:40 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 86 points, or 0.8%, at 11,271. The S&P 500 ($INX) was down by 6.6 points, or 0.5%, at 1,212. The tech-heavy Nasdaq ($COMPX) was falling by 24 points, or 0.9%, to 2,555.

 

Shares of Cisco were down 15% at $20.76 after the networking equipment company said yesterday it expects sales to grow 9% to 12% in fiscal 2011, less than the 13% analysts had expected. The company also said it would earn as much as 35 cents in the current quarter, excluding certain items, compared with estimates for 42 cents, according to Thomson Reuters.

 

”There were such high expectations for Cisco’s revenue outlook," said Jamie Cox, managing partner at Harris Financial Group. "Everyone who was in the stock for the sales guidance got out.”

 

Cisco, which some investors consider a bellwether for tech spending, was the worst-performing stock in the Dow and S&P 500. Other technology stocks were also slumping. Microsoft (MSFT) was down 1.3% at $26.59, while Oracle (ORCL) was losing 0.8% at $28.47. Dell (DELL) shares were falling 5% to $13.777 and Hewlett-Packard (HPQ) stock was slipping 2.8% to $42.94. (Microsoft owns and publishes MSN Money.)

The energy sector was Thursday’s best performer as investors continued to pour into commodities after the Federal Reserve said last week it would buy bonds to jolt the economy. Chevron (CVX) and Exxon Mobil (XOM) were among the Dow’s top gainers.

 

Crude oil for January delivery was adding by 6 cents to $88.35 a barrel. The December gold contract was up by $6.80 to $1,406.10 an ounce.

 

Finance officials from the Group of 20 nations started a two-day summit today in Seoul. Currency manipulation is expected to be a major topic. Several leaders of developing countries have said stimulus measures in the U.S. have weakened the dollar, making their economies more vulnerable to inflation.

 

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.5%.

 

London's FTSE was little changed and Frankfurt's DAX was up 0.1% as investors continued to question Ireland's ability to pay its debt.

 

Hong Kong's Hang Seng added 0.8% after Moody's (MCO) upgraded China's government bond ratings to Aa3 from A1. China, whose consumer price index rose 4.4% year-over-year in October, said inflation stands at 3% for the year, increasing the likelihood that the country will enact measures to cool growth. Japan's Nikkei rose 0.3%.

 

In other company news, Viacom (VIA.B) shares were up 4.1% to $39.68 after the media company reported quarterly per-share earnings of 75 cents, topping analysts' estimates for 68 cents. Walt Disney (DIS) is expected to report a profit of 46 cents a share after the market closes.

 

There are no economic reports scheduled for release, and U.S. bond markets are closed for Veterans Day.

  

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86Comments
Nov 11, 2010 9:46AM
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I heard an interesting quote from an analyst on the news this morning, he said something like "If a country could improve its economy by devaluing its currency, Zimbabwe would be an economic superpower!"
Nov 11, 2010 12:12PM
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allen.  I found out a long time ago, blame is blame is blame.  Typically a very disempowering position to be in.  Especially if perceived source, is something we cannot change.  This country needs to pull itself up.  And stop waiting for it to happen outside.  The angst many of us feel, is a powerful tool, if used properly.  I am afraid blame creates only a viscous cycle, that feeds on itself.  Meanwhile, precious time goes by, were meaningful personal change can happen to move us forward.  Blame, keeps us stuck in the mud.  IMO. 
Nov 11, 2010 12:24PM
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It looks like CSCO already bottomed out and coming off that bottom a bit.  No money to trade on it though.  There will be more to choose.  Gotta lot nice thank you's today for my service to the country.  Even though it's been 14 years since I got out, it's always nice to hear.  So, for all the other fellow veterans out there, thank you as well.  Cheers.
Nov 11, 2010 1:16PM
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I recently had a interesting experience.  One of my renters moved out, filed for bankruptcy and left behind a lot of good stuff.  For a change.  She must have decided it was too much work to pack her kitchen, so I got 2 complete sets of dishes, a new microwave, ever imaginable kitchen device, pots, pans, 2 sets of silver ware.   And 4 vacuums, full.  She must have decided, when a vacuum is full, you just by another one, instead purchasing new bags.  Point being.  She was a consumer.  Worked in retail.  And obviously had very little control in her spending.  And now she will have to replace all that stuff she left behind?  Is she like a lot of people who cannot dig them self out?  It's tough out there, but you start questioning peoples story, especially if they live like this gal, that moved out on me.
Nov 11, 2010 12:40PM
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To the Street,
I guess if I am reading your headline right because of Cisco and a few other tech. companies the whole stock market is going down. Have you seen the movie Planet of the apes lately the older versions , Thank God I read your headlines for pure entertainment , I think Planet of Apes shows more hope than your headlines do "COME ON". On Friday every one will forget what this headline said and will panic because of next days fantasy headline. If you invest in good companies that do not go out of business and always pay a higher dividend each quarter you are usually ok. I guess we all better panic after reading your newest pick of some disaster. When they are down thanks for the sale on the good companies that are out there they just seem to go right back up and higher.   I hope you find this as entertaining to read as your headlines are. I guess I better go back to watching Planet of the Apes. 
Nov 11, 2010 12:33PM
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Yes.  Thank you veterans.  You have the courage to perform a job, many of us don't have the guts to carry out.  I appreciate the sacrifices, all of you have made.  Thanks again.
Nov 11, 2010 12:21PM
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I blame the Martians for the mess we are in. We are ripe for an invasion from space.....The end is near..Party
Nov 11, 2010 12:20PM
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Pumpty Dumpty sat on the Wall

Pumpty Dumpty had a great fall

All the kings horses and all the kings men

bailed out Pumpty so he could do it AGAIN.

 

~Stric_9~

Nov 11, 2010 11:04AM
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slodeth -  If your ROI is 12%, why are you seemingly so angry? 
Nov 11, 2010 2:45PM
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I just want to know how this buying bonds to stimulate the economy is going to affect the average Joe? Usually in the market when the dollar is strong, and since oil is traded in dollars the price of oil goes down. Now it is doing just the opposite!! It is because investors are scared of just how this is going to help our stumbling economy. When investors get scared they invest heavily is commodities instead of buying stock in companies,which WOULD stimulate growth. The price of gas in my city has gone up .30 cents in just 3 days since the plan was implimented. If the Fed is looking to increase inflation....they got it. Inflation does NOT help us people...it just makes it cost more for the goods we pay for. IE>>>oil, bread, wheat and so on. The Fed has created a scenario that can destroy whatever growth we have seen by possible making our dollar stronger, but we will still not be able to buy as much for our money.
Nov 11, 2010 1:16PM
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uvuvuv- I've seen no shortage of people leave the store because their credit cards were declined or a store couldn't process the payment they were trying to make.  It's just human nature.  I'm sure that if the store offered them something TO put those away, many would take it. 

 

I know if I went through the trouble of filling a cart and couldn't buy because a store's credit card machine was down, I wouldn't be putting them back.  They already wasted enough of my time.

Nov 11, 2010 12:54PM
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The guy that writes the headline is told to connect the news event he/she thinks is biggest to the movement in the stock market.  So if it wasn't this one it would be.

Dow goes down because of G-20 summit.

Dow goes down because Obama doesnt get trade agreement.

or Dow goes down because it is Veteran's Day.

Nov 11, 2010 12:29PM
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I'm actually surprised that CSCO hasn't hit MU or NVDA harder than it has.  RST is getting destroyed today.  Apparently, that $.02 loss is not making the investors happy...oh yeah, i'm an investor and i'm not happy.  Oh well, the sun is shining today so life is still good.
Nov 11, 2010 12:04PM
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l take these one by one:

 

e're going to cut social security, those that have put it to a system their whole lives, but we are going to increase social benefits for those who have never put a dime into it. 

Um...no.  Based on my first reading, the plan is to mainly raise the retirment age (Again, I'd prefer if it was simply tied to life expectency), reduce the Cost-of-living inflation adjuster slightly (Note: This ONLY affects the Cost-of-living adjustment, and not the base payout a person receives), and reduce (eliminate?) payouts to people who do not need the extra Social Security monies, all reasonable proposals (and VERY close to what I've been personally calling for).

Then we're going to increase the gas tax.  Something that again hurts those who work and have to travel to their job.  Those that are sitting home on the couch all day don't have to buy gas. 

I got news: Road infrastructure is REALLY espensive (made worse by the face we need to repave everything every 5 years, because we go with the cheap 20 year asphault instead of the 30 year ashphalt which can go 20 years before needing repairs, but I digress...).  And as the population increases, we need more roads.

 

Want to pay less gas?  Then buy a hydrid/EV or whatever else comes along.  Or carpool.  Or do what I did and do both.

And we are still increasing social benefit programs while at the same time talking about decreasing social security benefits.  Yes, we have a social responsibility to provide for those who can't provide for themselves; but those that can provide for themselves also have a social responsibility to not be a burden on the taxpayer.  But the problem is that those who chose to sit at home and collect taxpayer handouts outnumber those that don't at the voting polls.  That's why our unethical politicians cater to them - just to buy votes.  But in the end . . . . . something is going to have to give; and it's going to be our children who are going to pay for this mess dearly.

Hence why the plan (at least in the case of Socail Security) reduces/elimates payouts to those who don't need the money.

Cut social security for those who have paid into a system their whole lives; increase gas taxes hurting the working class the most; and expand social benefit programs for those who have done nothing for us?  It's all so wrong.

You want to balence the budget or not?  I got news, most of the money the government spends is in support of the middle class; you cut money, you hurt them.  Thats not exactly rocket science...

 

As far as deficit reduction plans go, this isn't a bad one. (Not a good one either, just an OK one really).  The new income tax scheme is a good idea (lower overall taxes, but eliminate all deductions), as is the Social security reforms and the increased gas tax.  Not to sure on the reductions to medicare; I need to see exactly where those cuts are targeted first.

Nov 11, 2010 12:03PM
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The goverment(crooks) need to stop all funding going to other countries and put that F---king money in the United States
Nov 11, 2010 12:02PM
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About SS:

What do you guys think about injecting some choice in the matter? Come up with some formulas and break points that work to keep the system funded and gives Americans a choice. Such as:

-If over 60 and elect not to take SS then you can keep employer and employee contribution in your own IRA that can only be invested in CDs and money market.

-If 50-60 and elect not to take SS then you can keep employee contribution, but employer contribution goes into system as it does now.

-If 40-50 and " " ", you keep 5% of employee contribution.

-If 30-40 and "", you keep 3% of employee contribution, and possibly more in future when baby boomers start to pass away and system is supporting few people.

 

Can make IRAs for this money secure and safe from market by having only CDs and MM investments (diffuse dems problem) and eventually will create a system that most people will save for their own retirement instead of relying on govt (diffuse repubs problem).

Numbers and % may vary to get system to work, but everyone has a choice in the matter.

Nov 11, 2010 11:58AM
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Awful lot of buyers lining up on Book viewer for CSCO.  Pump and dump for the day, or will she recover, a point or two?
Nov 11, 2010 11:30AM
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gamerk.  I would have to agree.  I have made most of my money in this "shell" game, by making my own decisions, and by being very contrarian.  But, a plan is involved in every stock choice.  Entrance price/exit.  I have done more speculation lately, like CSCO, haven't owned or traded it for quite a while.  I think 22-23 is reasonable, after the dust settles.   Cheers.
Nov 11, 2010 11:29AM
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Gamer, the current recipients are OVERPAID. The earlier you got in the bigger the over payment. If the working person has to take wage cuts, salary freezes, layoffs, the elderly can live without their COLAs. The benefit should never been as high as it is. The current recipients should feel lucky they are getting what they get. If their benefits was solely based on on contributions and actuarial calculations they would never have received what they have been getting. Stop screwing the younger the people to cover the bad policies of older generations. We will be leaving them enough of a mess as it is.
Nov 11, 2010 11:28AM
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But in the short term. It looks like my only green for today so far is commodities. If I got to pay more for gas, might as well try and make some money on it....
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