- NEW YORK (Reuters) - Stocks
slumped on Thursday, posting the biggest drop in three weeks, as tech giant
Cisco Systems Inc.'s warning that sales would disappoint threw cold water
on hopes of recovery and convinced investors to book profits from a month
of gains.
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- "The Cisco news was the last thing that people needed,"
said Tim Heekin, director of trading at San Francisco investment bank Thomas
Weisel Partners. "You see the S&P 500 had an 18 percent rally
from October lows and combining that with the Fed rate cut, and the market
is due to roll down."
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- Stocks had risen Wednesday after the Federal Reserve
surprised investors with a half-percentage point cut in interest rates
and after the sweeping Republican victory in Congress fanned hopes of a
business-friendly administration.
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- But market watchers said Wall Street was still digesting
the Fed's action, which stoked fears among some that the U.S. economic
recovery might be faltering.
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- "They did change their policy statement to neutrality
so people think we're not going to get any more rate cuts," said Joe
Stocke, chief investment officer at StoneRidge Investment Partners. "Also,
they cut 50 basis points. That got some thinking if the economy is not
weaker than we thought."
- lost 42.28 points, or 2.98 percent, to 1,376.71, according
to the latest available data. The blue-chip Dow Jones industrial average
fell 184.77 points, or 2.11 percent, to 8,586.24. The broad Standard &
Poor's 500 lost 21.11 points, or 2.29 percent, to 902.65.
-
- It was the biggest percentage drop for all three market
gauges since Oct. 16. For the Dow, it ended a four-day streak of gains
and for Nasdaq it stopped a six-day up streak.
-
- About two stocks fell for each one that rose on the New
York Stock Exchange ) and the Nasdaq. More than 1.45 billion shares changed
hands on the Big Board and 1.75 billion on Nasdaq in active trading.
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- The Fed action likely will not be "the silver bullet"
that sparks cyclical recovery, Stephen Roach, chief economist at Morgan
Stanley, said in a note.
-
- "Make no mistake, an aggressive 50 basis point move
is a signal of heightened alert," he said. "Yet, had the monetary
authorities not qualified this action with a neutral bias, I believe there
would have been full-scale panic in the financial markets."
-
-
- In the U.S. Treasury market, longer-dated bonds surged,
few investors sharing the Fed's confidence in economic recovery, and sent
the new 10-year note up a full point as some money moved from stocks to
bonds.
-
- Cisco's weak forecast landed after a slew of better-than-expected
earnings reports had lifted stocks from five-year lows plumbed in early
October.
-
- Cisco fell 61 cents to $12.35, or 4.7 percent, and was
the most active on the Nasdaq. The company posted a net profit from a year-ago
loss, but said revenue in its second quarter would be flat to down as much
as 4 percent from its first quarter as customers cut spending.
-
- The cautious outlook whacked other Big Techs. Software
giant Microsoft Corp. fell $1.02 to $56.01, or 1.8 percent. Computer maker
International Business Machines Corp. lost $2.59 to $78.95, or more than
3 percent.
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- "Cisco's cautious comments serve as a reminder of
the tough business environment," said Bryan Piskorowski, Prudential
Securities' analyst in his commentary.
-
- Chip equipment makers were weighed down by losses for
Advanced Micro Devices Inc. said it was k
- AMD fell 41 cents to $6.82, or 5.7 percent. Chief Financial
Officer Robert Rivet said AMD plans 2003 capital spending of about $650
million, down from a reduced 2002 budget of between $750 million and $800
million.
-
- The Philadelphia semiconductor index sank 8.2 percent.
Among chip gear makers Applied Materials lost $1.14, or 6.8 percent, to
$15.71.
-
- Dow stock J.P. Morgan Chase & Co. Inc. fell $1.46
to $20.60 and was among the most active on the Big Board. The No. 2 U.S.
banking company said rumors it had suffered large losses on gold trades
were "false and irresponsible."
-
- Shares of Electronic Data Systems Corp fell 11.5 percent,
or $1.93, to $14.87, after consumer products giant Procter & Gamble
Co. said it decided not to sell its back office operations to EDS, scuttling
a multibillion deal weeks after an EDS profit war
- P&G, a Dow stock, edged up 15 cents to $88.01.
-
- Michaels Stores Inc. tanked to three-month lows after
the No. 1 U.S. arts and crafts chain cut its 2002 profit outlook. Recent
sniper attacks in the Washington, D.C., area hurt October sales, and prospects
for a bumper holiday season dimmed. Shares lost $10.78 to $33.90, or 24
percent.
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- On the economic data front, productivity chugged along
in the third quarter as businesses squeezed more out of their workers instead
of taking on new hires. But a separate report suggested the labor picture
is unlikely to improve soon. Fewer Americans applied for unemployment benefits
last week, but a closely watched average of these claims rose.
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