A pair of cautious outlooks in the tech sector weighed heavily on Wall Street Wednesday. Warnings from Cisco Systems and National Semiconductor generated a tech sell-off that sent the Nasdaq to its lowest level in a year.
The markets opened considerably lower on pressure from Cisco. After the closing bell Tuesday, the network equipment maker reported higher fourth-quarter sales and profits but expressed some doubt about business for its first quarter.
Cisco surprised investors by saying it expects fiscal first-quarter sales to come in flat to 2% above fourth-quarter numbers, the low end of Wall Street's expectations. For the quarter ended July 31, Cisco earned $1.38 billion, or 20 cents a share, up from $982 million, or 14 cents a share, in the year-ago quarter, on sales of $5.9 billion. Though the company beat earnings expectations, its cautious outlook on corporate technology spending rattled investors, and several brokerage firms downgraded the stock. Cisco fell 11%, or $2.17, to $18.29.
"For such a good quarter, you'd expect them to have something better to say about the future," David Willis, a Meta Group analyst, told The Associated Press. "Characteristic of Cisco, they refused to do that and were actually talking more cautiously about the future."
National Semiconductor fell $2.20, or 14%, to $13.50, after it said revenue for the current quarter is likely to miss forecasts because of a drop in orders. Those remarks raised alarms among analysts about prospects for the chip sector.
A late-day rally helped most key indexes reduce their losses after a sluggish start. The InformationWeek 100 fell 6.51 points, or 2.4%, to 266.78. The Nasdaq composite index fell 26.28 points, or 1.5%, to 1,782.42. The Dow Jones industrials fell 6.35 points, or 0.6%, to 9,938.32, and the Standard & Poor's 500 index fell 3.25 points, or 0.3%, to 1,075.79. The Nasdaq-100 tracking stock fell 29 cents, or 0.9%, to $32.92 as more than 121.8 million shares changed hands.
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