Tech Socked After Calm Stretch

A revenue miss at Cisco is taken out on the Nasdaq.
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Updated from 4:07 p.m. EST

Tech stocks tanked Wednesday as

Cisco's

(CSCO) - Get Report

top-line miss and higher oil prices relieved traders of their recent indecision.

The

Dow Jones Industrial Average

shed 60.52 points, or 0.56% to 10,664.11; the

S&P 500

fell 10.31 points, or 0.86%, to 1191.99; while the

Nasdaq

dropped 34.13 points, or 1.64%, to 2052.55, as the tech index posted its largest single-session point loss since Jan. 4.

Volume on the

New York Stock Exchange

was 1.51 billion shares, with decliners beating advancers by a ratio of about 2 to 1. Volume on the Nasdaq was 1.95 billion shares, with decliners beating advancers by a 3-to-1 margin.

In other markets, the 10-year Treasury bond was up 10/32 in price to yield 3.98%, while the dollar's run stalled against the yen and euro.

Oil futures finished up 6 cents to $45.46 a barrel after Energy Department inventory data that showed U.S. crude supplies fell 1 million barrels last week. The Philadelphia Oil Service Sector Index rose sharply early morning on the news, but ended virtually unchanged.

"We're into one of these catalyst-empty periods," said Larry Wachtel, senior market analyst with Wachovia Securities. "We're in a period without any big earnings and with nothing big on the geopolitical front. There's nothing to pick on; people sit around wondering what they're going to respond to. We're in a drifting phase with lower volumes, and you're forced into technical analysis. There's no incendiary spark."

Cisco finished down despite reporting a near-doubling in fourth-quarter earnings to $1.4 billion, or 21 cents a share. Excluding items, the network-gear maker earned 22 cents a share, matching estimates. At $6.06 billion, however, revenue was about $70 million below estimates. The stock fell 61 cents, or 3.3%, to $17.63.

The ousting of

Hewlett-Packard

(HPQ) - Get Report

Chairman and CEO Carly Fiorina failed to boost the Dow on Wednesday. The company announced that Fiorina's resignation was effective immediately and that, in the interim, Robert Wayman has been named CEO and appointed to the board of directors. Shares of H-P rose by $1.39, or 6.9%, to $21.53, ending off its session high.

"The H-P story is very company-specific," said Peter Boockvar, equity strategist with Miller Tabek & Co. "Cisco's numbers fit with a lot of earnings releases of technologies reporting OK earnings, but not great ones. Plus, they're giving guidance that's just OK, but not great. The Cisco impact is greater to other names, and it's more of an indication of IT spending."

Insurer

American International Group

(AIG) - Get Report

said fourth-quarter earnings jumped 11% from a year ago, boosted by higher premiums, while earnings before investment gains totaled $1.17 a share, 4 cents better than forecasts. Revenue rose 16% from last year to $25.8 billion. AIG gained $1.58, or 2.3%, to $69.31.

Insurer

Cigna

(CI) - Get Report

also beat estimates, reporting fourth-quarter earnings of $558 million, or $4.16 a share, up from $281 million, or $2 a share, from a year ago. Excluding items, income totaled $323 million, or $2.41 a share, a 44% increase year over year, aided by the sale of its retirement unit. Revenue dipped to $4.34 billion from $4.5 billion last year. The Thomson First Call consensus projected earnings of $1.61 per share on revenue of $4.2 billion. Cigna added $1.43, or 1.7%, to $85.35.

Shares of

Intuitive Surgical

(ISRG) - Get Report

surged after the company reported a profit late Tuesday of $11.7 million, or 32 cents a share, compared with a loss of $4.9 million, or 16 cents a share, from a year ago. Total sales grew 64% to $45.2 million from last year. The company attributed higher sales to its da Vinci Surgical Systems shipments and revenue growth. Shares finished up $6.29, or 15.3%, to $47.39.

Krispy Kreme Doughnuts

(KKD)

said it will lay off 125 employees at its Winston-Salem, N.C., headquarters and will abandon use of its corporate jet in order to conserve cash. The struggling company believes it will save $7.4 million a year from the changes. Shares dropped 73 cents, or 9.2%, to $7.21.

Wall Street analysts had an active morning Wednesday, with CIBC starting

Goldman Sachs

(GS) - Get Report

with an outperform rating and Merrill Lynch upgrading

eBay

(EBAY) - Get Report

.

At CIBC, analysts say Goldman is the investment bank to buy ahead of an expected rebound in mergers and IPO underwriting, and said the stock is currently trading at a relative discount to its peers. The brokerage set a price target of $126 on the stock, about 13% above its Tuesday close of $111.55. However, shares dipped 10 cents, or 0.1%, to $111.45.

At Merrill, eBay goes to buy from neutral in part because of an expectation of lower volatility in the stock now that short-term traders have mostly fled it. Merrill said eBay still possesses various competitive advantages over

Amazon.com

(AMZN) - Get Report

, including better revenue prospects and more places to make capital investments. Shares of eBay gained 46 cents, or 0.6%, to $78.99.

Prudential downgraded

Target

(TGT) - Get Report

to neutral from overweight, citing valuation. The broker feels that the retailer's strong growth prospects are already priced into shares and that the company is unlikely to beat expectations for 2005 earnings. Shares of Target were off 94 cents, or 1.9%, to $49.70.

Semiconductors failed to receive a boost after Morgan Stanley upgraded

Advanced Micro Devices

(AMD) - Get Report

to overweight. The broker also gave a stock price target of $25 citing a belief that the company will cut or reduce its exposure to the flash-memory business and will gain market share. While AMD rose 30 cents, or 1.7%, to $17.94, the Philadelphia Semiconductor Sector Index fell 2.2%.

Overseas markets finished mostly lower, with London's FTSE 100 down 0.1% at 4990 and Germany's Xetra DAX down 0.4% at 4353. In Asia, Japan's Nikkei fell 0.2% overnight to 11,473, while Hong Kong's Hang Seng added 0.4% to 13,846.

Looking ahead,

Dell

(DELL) - Get Report

reports quarterly earnings after the closing bell Thursday. The company is expected to earn 36 cents a share on revenue of $13.5 billion, according to Thomson First Call.

On the economic front tomorrow, the government is expected to report that the trade gap narrowed in December to $57.4 billion, after hitting a record $60.3 billion in November. Also, the

Treasury Department

reports monthly budget data. The consensus estimate calls for a surplus of $5.1 billion in January, after a $1.4 billion deficit in December.

"So far this week there has been an absence of any economic news," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "With earnings season basically finished, it'll be about economic numbers going forward."