Stocks look to extend losses after Cisco’s revenue disappoints investors worried about economyBy Joyce M. Rosenberg, AP
Thursday, August 12, 2010
Stocks look to extend drop after Cisco earnings
NEW YORK — Stocks headed for a modestly lower opening Thursday after Cisco Systems added to investors’ anxiety by reporting revenue figures that fell short of forecasts.
Stock index futures fell slightly following Wednesday’s big market drop that sent the Dow Jones industrial average down 265 points. Investors have a darker view of the economy after the Federal Reserve lowered its assessment of the recovery on Tuesday. And the latest economic numbers from the U.S. and other countries point to slower growth.
Cisco Systems Inc.’s revenue from its latest quarter and its forecast for future revenue both fell short of analysts’ expectations. The company’s stock fell more than 7 percent in pre-opening trading and other tech stocks also fell.
Investors have been focused on revenue since companies began reporting second-quarter earnings almost a month ago. They’re concerned by the connection between revenue and the economy — if revenue is down, it’s a sign that consumers’ reluctance to spend is starting to affect companies’ sales and profits. Investors see the revenue shortfalls as another sign of a weakening recovery.
Sara Lee Corp.’s revenue also missed analysts’ forecasts. The food maker’s stock was up slightly before the opening of trading.
The day’s economic reports included the Labor Department’s weekly count of the number of people applying for unemployment benefits for the first time. Economists expect the number to come in at 465,000, a drop from the previous week. But that’s still well above the levels that indicate the recovery is regaining strength.
Dow futures fell 33, or 0.32 percent, at 10,304, while Standard & Poor’s 500 futures fell 4.50, or 0.4 percent, at 1,080.50. Nasdaq 100 futures fell 5.00, or 0.27 percent, at 1,832.75.
Interest rates rose in the Treasury market as investors appeared to have less need for the safety of government debt. The yield on the 10-year Treasury note, which rises as its price falls, was 2.73 percent, up from late Wednesday’s 2.69 percent.
World markets were quieter Thursday after big drops the previous day. Japan’s Nikkei index closed down 0.9 percent. In London, the FTSE-100 index was up 0.2 percent in afternoon trading. Germany DAX index was down 0.3 percent, while the CAC-40 index in Paris was down 0.3 percent.
In other earnings news, General Motors Co. reported net income of $1.33 billion in the April-June quarter, its second straight quarterly profit. The company, which is 61 percent owned by the federal government, is moving toward a public offering of its shares.