Closing Market Report

Star-Bulletin news services

Concerns about Cisco
send stocks tumbling

By Amy Baldwin
Associated Press

NEW YORK >> Investors sold technology shares sharply lower today amid rumors that Cisco Systems will be the next company to warn of weaker profits. Blue chips also fell, compounding losses ran up yesterday after IBM reduced its earnings outlook.

"You have a market that is really hard pressed to mount an offensive," said Bryan Piskorowski, a commentator at Prudential Securities, noting that first-quarter earnings are just now trickling in, and that investors won't start hearing from most big companies until next week.

It was the second time tech investors were worried about the possibility of an earnings warning. On Friday, tech shares fell on rumors of an IBM warning -- which the computer company made yesterday, forecasting weaker-than-expected first-quarter profits and revenue.

The Dow Jones industrial average ended today down 40.41, or 0.4 percent, at 10,208.67. Yesterday, the blue-chip index recovered from a 150-point caused by IBM's news and closed just 22.56 lower.

The broader market recor- ded steeper losses. The tech-dominated Nasdaq composite index fell 43.30, or 2.4 percent, to 1,742.57, having advanced 15.84 yesterday despite IBM's warning. The Standard & Poor's 500 index declined 7.49, or 0.7 percent, to 1,117.80.

Advancing issues outnumbered decliners 17 to 14 on the New York Stock Exchange, with 1,739 up, 1,382 down and 230 unchanged. Volume was light at 1.21 million shares, but ahead of yesterday's 1.10 billion.

The NYSE composite index clipped 0.80 to 590.84, the American Stock Exchange composite index fell 6.02 to 898.43 and the Russell 2000 index, the barometer of smaller company stocks, finished unchanged at 503.01.

The Treasury's 2-year note rose 18 to 100 1 1/32; its yield fell 7 basis points to 3.44 percent. The 10-year note gained 1432 to 97 1/2; its yield fell 6 basis points 5.20 percent. The 30-year bond gained 1832 to 95 2632; its yield lost 4 basis points to 5.67 percent.

Investors have been selling stocks for three weeks due to their qualms about earnings and the economy and concerns about the Mideast conflict.

Analysts said there's little reason to buy, although there has been sporadic bargain hunting as stock prices have fallen to more attractive levels. For investors to commit to the market, they need companies to report solid first-quarter earnings and they must hear more positive assessments of future results.

"We are starting to move to better results but that takes time," said Brian Belski, fundamental market analyst at US Bancorp Piper Jaffray, adding that investors will continue to be cautious until earnings show definite improvement. "People want to be able to reach and touch those results to make sure they are real."

Cisco Systems fell $1.36 to $14.82 after RBC Capital Markets lowered its third-quarter estimates on the networking stock, citing a continued slump in capital spending on information technology. Later in the session, rumors spread on Wall Street that Cisco would be the next big tech company to warn about profits.

Other tech losers included Microsoft fell $2.35 to $54.87, and Intel declined $1.47 to $28.46. Yahoo! stumbled 38 cents to $18.46 ahead of its earnings due out tomorrow.

But Dow industrial IBM rose 33 cents to $87.74, a meager recovery from yesterday's $9.84 loss.

Among today's winners, Wendy's gained $1.36 to $37.30 after raising its fiscal 2002 earnings estimate. Lehman Brothers, Goldman Sachs and Credit Suisse First Boston also raised various earnings estimates for the fast-food company.

Positive growth prospects boosted Wal-Mart, up 32 cents at $60.10. Salomon Smith Barney said it expects the retailer to record 13 percent profit growth over the next three to five years. The brokerage today initiated coverage of the retailing stock with a "buy" rating.

Meanwhile, shares of bank- rupt autoparts maker Federal-Mogul Corp. plunged today when a report that it cut a deal to emerge from bankruptcy further strained investors' already frayed nerves.

CNBC television reported today that the Southfield, Mich.-based company, which has staggered beneath a pile of asbestos-related claims, forged a deal to give asbestos claimants just over half of its equity, with its bondholders assuming the rest, in exchange for an agreement that claimants surrender their right to initiate new lawsuits

However, in a statement after the market closed, Federal-Mogul refuted the story and said its board of directors and management team remain in control of the company.

Shares of Federal-Mogul -- which makes brake pads, ignition systems, replacement parts, and other automotive components -- shot as much as 50 percent higher after the television report but then erased gains and ended down 16 cents, or 21 percent, at 60 cents on the New York Stock Exchange.

A spokeswoman for Federal-Mogul said she was not aware that a deal had been finalized, and an attorney for one of the asbestos claimants against Federal-Mogul said he had been working on an agreement to prevent a drawn-out bankruptcy at the company, but said he had not signed anything.

Any such deal, if reached, would appear to be the first of its kind amid a hostile legal environment for companies that have used or made products containing asbestos, a potentially cancer-causing mineral that has become the latest frontier for plaintiffs' lawyers.

Overseas, Japan's Nikkei stock average finished today down 2.1 percent. In Europe, France's CAC-40 rose 0.7 percent, while Germany's DAX index and Britain's FT-SE 100 were essentially unchanged.

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