Cisco’s outlook weighs on US stocks recovery
THE DOW and the S&P 500 eked out a modest gain yesterday as investors dipped back into the market after a weak stretch, but a disappointing outlook from tech bellwether Cisco Systems and caution about Europe limited gains.
In a positive development, Eurozone officials said the bloc’s countries are prepared to keep financing Greece until the country forms a new government, either after Sunday’s election or if new elections are needed next month.
Cisco Systems lost 10.5 per cent to $16.81, its biggest percentage drop since February 2011, making it the biggest drag on the market. The network equipment maker forecast profits below Wall Street’s estimates.
The Dow’s modest rise broke a six-day losing streak for the blue-chip index. But the S&P 500 could not hold enough gains to close above its April low. Still, the S&P 500 has rebounded after falling to a two-month low near 1,340 on Wednesday.
“You are seeing traders and investors come into some of these very oversold sectors and buying on the dips. Then suddenly, the people who are scared decide to start selling into it,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
“That is what you are seeing today. You are seeing the see-saw between people who are coming in, and adding positions slowly, and people who are saying, ‘The world is coming to an end. I want out.’”
The Dow Jones industrial average rose 19.98 points, or 0.16 per cent, to 12,855.04 at the close. The Standard & Poor’s 500 Index added 3.41 points, or 0.25 per cent, to 1,357.99. But the Nasdaq Composite Index fell 1.07 points, or 0.04 per cent, to close at 2,933.64.
The latest uncertainty surrounding Greece and the Eurozone’s sovereign debt crisis helped spark a drop in the S&P 500 in five of the past seven sessions, sending the benchmark index down four per cent. While the region’s difficulties persisted with the political gridlock in Greece, investors used the market’s declines as a buying opportunity.
The number of Americans applying for jobless benefits fell last week, but from an upwardly revised figure from the previous week. The report follows last month’s nonfarm payrolls report, which showed weak employment growth in April.
Signs of softness in the US economy recently have led some investors to err on the side of caution and cut back on sectors exposed to the vicissitudes of the economic cycle. The Standard & Poor’s 500 could fall five per cent to seven per cent from its April high, and see “several months” of choppy trading, said Citigroup’s chief US equity strategist Tobias Levkovich.