Updated from 3:12 p.m ET.
Stocks swung to positive, ending the day on the plus side after traders hung on to hopes that the latest kick in the teeth -- last night's bleak news from
-- was merely another sign that the worst is over.
The major indices flipped between red and green all day. The tech-heavy
Nasdaq finally ended up 14 to 1923. The
Dow Jones Industrial Average shook off earlier losses and finished 58 higher to 10,217.
"Cisco had its moment in the sun," said Bob Basel, director of listed trading at
Salomon Smith Barney
. "Now, it's time to start thinking about other earnings announcements." Tech companies reporting after the close of regular trading today include semiconductor bellwether
The story of the session was Cisco. After the closing bell yesterday, the networking giant said its fiscal third-quarter earnings would miss analysts' expectations and announced that it will write down an
astonishing $2.5 billion in parts -- a sum equal to the inventory the networker was carrying at the end of last year. The company also reported that it would eliminate 8,500 jobs. But in the face of the news, which by all accounts was very bad, Cisco ended off 3.2% to $16.65.
Traders said the market was able to shake off the company's warning because it had already discounted the news. After all, Cisco has tumbled from $71 per share to the mid-teens, amid the Nasdaq meltdown.
"We knew this was coming," said Brian Belski, fundamental market strategist at
U.S. Bancorp Piper Jaffray
. "The precipitous drop in stock prices shows that the market had already taken it into account."
"Because of the minefield of earnings news we've already had, people were braced for this news," added Peter Coolidge, managing director of trading at
Brean Murray Foster Securities
. "The market didn't like the news, but it has shock absorbers for it." Today's reaction, Coolidge said, gives encouragement to investors who think we've seen an interim bottom.
analyst community's response to the Cisco report seemed to confirm that notion. With this warning, they said, Cisco may finally have put the worst news behind it. Things can only get better, said
Credit Suisse First Boston
A similar call on chip stocks early last week helped propel a four-day rally in tech stocks. But a contrary call out of
yesterday deflated some of those gains.
There is no doubt the fundamentals underlying key technology companies are poor. The business climate "has never been more challenging," Cisco said in its statement yesterday. The company cited continued global economic challenges, the slowdown in the global telecom market and the deceleration in corporate spending for information technology. Still, investors are hanging on the technical piece of the puzzle -- believing that things can only get better.
Cisco rivals traded ahead.
rose 5.2% to $50.87, while
gained 1.9% to $20.27.
But other technology sectors moved lower this afternoon. Chip stocks, which fell on the Morgan Stanley downgrade yesterday, but rose earlier today, were lately sliding. Ahead of its earnings release,
, shed 0.9% to $26.06. The
Philadelphia Stock Exchange Semiconductor Index
, which tracks the chip industry, was lately off 0.5%.
Outside of the tech sector, a few Dow bellwethers rose after reporting strong earnings. Among them were
Johnson & Johnson
, up 2% to $94.45, and tobacco heavyweight
, ahead 2.7% to $47.81.
Today's heaping of economic reports went largely unnoticed on Wall Street today. The
consumer price index released this morning showed consumer prices rose slightly in March. The index gained 0.1% last month, in line with expectations of economists polled by
. The CPI, a key inflation gauge, measures the change in cost of a representative basket of goods and services such as food, energy, housing and transportation. Today's report affirms the belief that inflation is not an important concern as the economy slows.
Industrial production rose 0.4% in March, the government said this morning. It was expected to fall 0.1%. Excluding cars and parts, industrial output in March was unchanged compared to February. It measures the change in production levels at factories, utilities and mines nationwide. In the economic debate, concerns about inflation have taken a back seat to worries about the pace of economic growth in recent months.
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Just back from Easter holiday today, European investors were selling stocks, as Cisco's earnings warning put pressure on telecom stocks there. But the major indices closed well off their session lows. London's
closed down 5.5 to 5761.7. The Paris
slid 31.7, or 1.9%, to 5268.9, and Frankfurt's
-- still trading -- was lately down 84, or 1.4%, to 5917.
The FTSE was earlier losing 99.4 points, the Paris
was earlier off 130.9, and Frankfurt's
was earlier down 149.2
The euro was lately trading at $0.8783.
Cisco also put a dent in Asian telecom stocks overnight. Returning from Easter holiday Tuesday, Hong Kong investors spun the
2.95% lower, or 383 points, to 12,606.5. Tokyo's key
fell for a second straight day this week, closing down 1.42%, or 187.8, to 13,067.
The dollar was trading at 123.9 yen.
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