Market drops on Cisco's view
NEW YORK (Reuters) - Stocks fell for a second straight day on Thursday, led by declines in the Nasdaq after tech bellwether Cisco Systems Inc signaled the credit crisis was hurting demand from key customers, including banks.
A late-day rebound in beaten-down financial stocks, however, pulled the indexes well off their worst levels of the day. The rebound was attributed to traders buying stocks to cover their earlier bets against the financial sector, which has been trading at two-year lows.
The Nasdaq was still left with its biggest two-day percentage drop in five years.
Cisco's chief executive said late on Wednesday the largest maker of computer networking equipment had suffered a dramatic drop in orders from banks and retailers, triggering concerns about Cisco's growth prospects, which relies on business spending.
Voicing similar worries about the outlook for the economy, Federal Reserve Chairman Ben Bernanke added to the sense of caution. He said the economy faced risks on both the growth and inflation fronts.
"They got the stocks that were doing well, the big-cap tech, the ones that have been immune to the subprime story," said Stephen Massocca, co-chief executive, San Francisco-based investment bank Pacific Growth Equities, in reference to the impact of the Cisco CEO's comments.
Until recently, investors had been optimistic that tech shares offered a safe haven amid the credit turmoil that has roiled shares of banks and brokerages.
But, "when you have dramatic moves in the market, you're going to have a lot of day trading and that leads to volatility. A lot of people got short midday and had to cover at the close."
The Dow Jones industrial average fell 33.73 points, or 0.25 percent, to end at 13,266.29. The Standard & Poor's 500 Index was down just 0.85 of a point, or 0.06 percent, at 1,474.77. The Nasdaq Composite Index was down 52.76 points, or 1.92 percent, at 2,696.00.
QUALCOMM OFF 7 PERCENT ON OUTLOOK
After the closing bell, wireless technology developer Qualcomm Inc gave a disappointing outlook for fiscal 2008 earnings and revenue. Its stock slid 7.4 percent to $36.80 in extended-hours trading. On the Nasdaq, Qualcomm closed at $39.76, down 3.5 percent.
During the regular session, the Dow and S&P had been down 1 percent each and the Nasdaq was down 3 percent. The blue-chip Dow average at one point broke below its 200-day moving average, joining the S&P 500, which had a similar breakdown on Wednesday.
The Dow and S&P still finished at their lowest since mid-September and have given back all of the ground gained since the first of the Federal Reserve's two interest-rate cuts this fall.
Shares of Cisco fell 9.5 percent to $29.63 and were the catalyst for the slide by other tech shares, analysts said.
The heaviest weight on the Nasdaq 100 was Apple, down 5.8 percent at $175.46, followed by Cisco. Continued...
Dollar, stocks dive on Fed speak
