Stocks Fall After Cisco Earnings, Jobless Data
NEW YORK (AP) – Technology companies led the stock market to its third straight loss Thursday after Cisco Systems’ earnings report raised more questions about the economy.
The Dow Jones industrial average fell 58 points. The Nasdaq composite index had a steeper loss in percentage terms, a reflection of the drop in tech stocks. Analysts said many traders were on vacation, and the market’s resulting light volume helped skew price changes.
Stocks also fell after the Labor Department reported that the number of people filing for unemployment benefits for the first time rose last week to 484,000. The gain was small at 2,000, but economists had expected the number to drop. The news pointed to continuing weakness in the labor market, yet another sign that the economic recovery is weakening.
The latest earnings reports added to the market’s darkening view of the economy. Cisco Systems Inc.’s revenue from its latest quarter and its forecast for future revenue both fell short of analysts’ expectations. The company’s stock fell 10 percent and other tech stocks also fell.
Investors have been focused on revenue since companies began reporting second-quarter earnings almost a month ago. They’re concerned by the connection between revenue and the economy _ if revenue is down, it’s a sign that consumers’ reluctance to spend is starting to affect companies’ sales and profits. Investors see the revenue shortfalls as another sign of a weakening recovery.
Sara Lee Corp.’s revenue also missed analysts’ forecasts. And retailer Kohl’s Corp. disappointed the market by lowering its earnings outlook because it expects sales to slow during the second half. That period includes the holiday season, when retailers hope to make a large part of their profits.
Stocks extended their losses from Wednesday, when the Dow fell 265 points as investors reacted to the Federal Reserve’s lowering of its assessment of the recovery on Tuesday. Economic data from several countries including the U.S. contributed to the heavy selling.
Investors don’t have a sense of whether the recovery will hold. The uncertainty has led to big losses, but many traders are staying out of the market and not making any moves. That has made trading volume even lighter than usual during July and August, when vacations leave trading desks thinly staffed.
Charlie Smith, chief investment officer with Fort Pitt Capital Group in Pittsburgh, predicted few major market moves for the rest of the month because so many key market players are away.
Smith said the market’s drop over the past few months was due more to investors’ more negative outlook rather than a fundamental change in the economy.
“We had a weak recovery back in March and April,” Smith said. At that point, the market was moving toward its post-financial crisis high. Stocks began falling after the major indexes peaked in late April.
According to preliminary calculations Thursday, the Dow fell 58.88, or 0.6 percent, to 10,319.95. The Dow fell almost 320 points over the course of Tuesday and Wednesday.
The Standard & Poor’s 500 index fell 5.86, or 0.5 percent, to 1,083.61. The Nasdaq composite index fell 18.36, or 0.8 percent, to 2,190.27.
Losing stocks were ahead of gainers by about 2 to 1 on the New York Stock Exchange, where volume came to 1 billion shares.
Interest rates rose in the Treasury market after falling sharply Wednesday, when investors were seeking the safety of government securities. The yield on the 10-year Treasury note, which rises as its price falls, was 2.75 percent, up from late Wednesday’s 2.69 percent.
Markets in Europe fell after the U.S. unemployment news, then regained ground. In London, the FTSE-100 index was up 0.4 percent. Germany’s DAX index was down 0.3 percent, while the CAC-40 index in Paris was down 0.2 percent. Earlier, Japan’s Nikkei index closed down 0.9 percent.
(Copyright 2010 by The Associated Press. All Rights Reserved.)