Stocks Slump on Cisco, Euro Debt Fears

NEW YORK ( TheStreet) -- Stocks finished lower Thursday, weighed down by Cisco's ( CSCO) weak sales guidance and concerns that more bailouts would be needed for debt-logged eurozone countries.

The Dow Jones Industrial Average shed 74 points, or 0.6%, to close at 11,283. The S&P 500 fell 5 points, or 0.4%, to 1213, while the tech-heavy Nasdaq Composite was dropped 23 points, or 0.9 %, to settle at 2555. Earlier in the session, the index sank as low as 2524.

Cisco , Walt Disney ( DIS) and Hewlett-Packard ( HPQ) were the Dow's biggest laggards. Pfizer ( PFE), Chevron ( CVX) and Exxon Mobil ( XOM) helped contain losses.

In a surprise early announcement before the closing bell, Disney said profits fell to $835 million or 43 cents a share, compared to $895 million or 47 cents a year earlier. The numbers were below estimates of 46 cents per share. The stock shed 3.8% to $35.56 and was falling 3% in extended trading.

Shares of Cisco finished the session 16% lower at $20.59 after the tech bluechip gave a disappointing sales guidance citing weak public sector spending. The news pressured stocks throughout the sector. HP shares lost 2.4% to $43.10 while shares of Altera ( ALTR) declined 2.8% at $32.90.

Jamie Cox, managing partner at Harris Financial Group, said the fallout in the tech sector from Cisco's weaker-than-expected sales guidance is "completely overblown."

"I don't think Cisco is as much of a macro play as some people think, largely because Cisco gets a lot of its money from the public sector. So I think what the market is seeing today is more specific to the company and not the tech sector at large. If you were to look at the entirety of Cisco's revenue, I don't think it really suffered that significantly in any other areas outside of its public business."

"There are such high expectations for Cisco's revenue outlook and the whisper number was much higher so everyone who was in the stock for the sales guidance got out," he said. "Plus, today the bond market is close and there's no economic data. In the absence of these things, it's easy to sell the market down."

President Obama joined leaders of the largest economies in Seoul, South Korea for the two-day G20 summit. The U.S. and South Korea were unable to reach an agreement to allow free trade between the countries but vowed to continue talks. Meanwhile China continued to resist pressures from the U.S. to revaluate its currency.

Investors, however, appeared more concerned about the eurozone debt situation as Irish, Greek and Spanish bonds continued to weaken and the euro fell 0.8% to $1.3662 from $1.3779. Speaking from the G20 meeting, European Commission President Jose Manuel Barroso said the EU is prepared to support Ireland, according to a Wall Street Journal report.

The dollar traded higher against a basket of currencies with the dollar index up by 0.6%. Analysts say a short-term rally in the dollar is likely, as concerns on the eurozone resurface. In recent years a rally in the dollar against the euro has generally been bad for U.S. stocks.

Market attention was also on China, which said its consumer price index rose 4.4% year over year in October. Average inflation for the year now stands at 3%, the government's target, increasing the likelihood that the country will enact measures to cool growth. The news pushed metal prices up as investors sought hedges against inflation. According to a Bloomberg report, copper soared to a 30-month high in New York and hit a record in London. The December copper contract trading on the Comex was up by roughly 6 cents to trade at $4.03 a pound.

Also on Thursday, Moody's Investors Service raised China's debt rating by one notch to Aa3, citing the country's strong financial standing.

There were no economic reports scheduled for release on Thursday and bond markets were closed for the Veterans Day holiday.
Traders

Level 3 Communications ( LVLT) saw its stock jump 8.7% to $1.12 following news that it was selected by Netflix ( NFLX) to support the online video rental company's streaming and storage capacities.

Boeing ( BA) shares dipped 2.5% to $65.37 a day after the company said it postponed flight tests for its 787 Dreamliners following an electrical fire that occurred during a test flight in Texas on Tuesday.

Shares of Viacom ( VIA.B) rose 3.1% to $44.59 after the entertainment content company topped consensus estimates with adjusted profit of 75 cents a share. Sales increased 5% to $3.33 billion, meeting expectations.

Shares of Nasdaq-listed Indian online-travel booking site MakeMyTrip ( MMYT) jumped 12.6% to $38.76 after a Caris analyst reiterated his buy rating on the stock ahead of its earnings report on Monday. Better-than-expected results from Priceline.com ( PCLN) were also likely buoying the stock.

H&R Block ( HRB) said it is in talks to settle a lawsuit it filed against HSBC ( HBC) which provides funding for its refund anticipation loans. The stock was up 4.4% to $12.80.

Massey Energy ( MEE) surged 2.1% to $47.02 on reports that Coal India was considering a bid for one of its mines.

Wal-Mart ( WMT) said that it would offer free shipping for 60,000 items on its website, with no minimum purchase required until Dec. 20. The stock was off 0.3% at $54.35.

After Thursday's closing bell, Nvidia ( NVDA) said its profits dropped 21% to 15 cents per share beating estimates by a penny. Shares were rising 1% in extended trading.

Sunpower ( SPWRA) reported an adjusted profit of 26 cents per share, double the consensus of 13 cents. Shares were lower by 1% in aftermarket trading.

In commodity markets, the January crude oil contract lost 4 cents, to settle at $88.60 a barrel. The December gold contract rose by $4 to settle at $1,403.10 an ounce.

Hong Kong's Hang Seng added 0.8% and Japan's Nikkei rose 0.3%. The FTSE in London closed flat while the DAX in Frankfurt rose 0.05%.

--Written by Melinda Peer and Shanthi Venkataraman in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.