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Techs stung, pulling
down rest of market
NEW YORK >> A tentative forecast on business spending from Cisco Systems Inc. hit the technology sector hard yesterday, and the Nasdaq composite index plunged 2.5 percent. The selloff dragged the rest of the market downward in volatile trading.
Cautious investors moved to defensive positions, with blue chip shares showing greater strength than more speculative tech and small-cap stocks. As earnings season winds down, some analysts say the market may be headed for a pause, but despite yesterday's tech selling, investors don't seem ready to pull out in large numbers yet.
"Today, there's a lot of indecision. This market is as wimpy as I've seen in a long time," said Brian Belski, market strategist at Piper Jaffray. "But there's a lot of pent-up buying demand, lots of inflow into the market, so I tend to think it's too early to jump on the correction bandwagon."
The Nasdaq tumbled 52.07, or 2.5 percent, to 2,014.14 -- its biggest one-day point loss since Sept. 24, when it closed down 58.02 at 1,843.70. The tech-heavy index was at its lowest level in more than a month, but was still up 0.5 percent for the year.
The Dow Jones industrial average fell 34.44, or 0.3 percent, at 10,470.74, while the Standard & Poor's 500 index lost 9.51, or 0.8 percent, to 1,126.52.
The price of the Treasury's 10-year note closed down 7/32 point, while its yield rose to 4.12 percent from 4.10 percent Tuesday. Two-year Treasury notes were down 1/32 point, but their yield was steady at 1.76 percent.
The Nasdaq's slump on Cisco's less-than-stellar forecast underscores that "a lot of good news is priced in, and any sort of disappointment can affect prices disproportionately," said Brian Pears, head equity trader at Victory Capital Management in Cleveland.
"Broadly speaking, I still feel pretty good; the economy is clearly growing at this point," Pears said, adding that he would be keeping an eye on the government payroll report due tomorrow. "I think the market's going to hold its breath until we get those numbers."
Corporate earnings have beaten forecasts overall and economic numbers have been consistently strong. A better-than-expected rise in factory orders for December, reported yesterday by the Commerce Department, offered further evidence that the recovery remains on track.
Cisco Systems dropped $2.33, or 8.8 percent, to $24.08, although its earnings beat Wall Street's expectations. Industry observers had watched the results for signs that businesses were investing more in tech, but the networking equipment company indicated any rebound in spending remains uncertain.
Another significant decliner in the Nasdaq was Ciena Corp., which plummeted $1.30, or 18 percent, to $5.99, after the telecommunications equipment maker warned investors that its first-quarter revenues were likely to drop below forecasts. The company blamed the shortfall on the timing of a single order.
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