- The Washington Times - Wednesday, November 10, 2004

NEW YORK (AP) — Lower-than-expected sales at Cisco Systems Inc. sent tech stocks tumbling yesterday while the overall market was little changed after the Federal Reserve announced a widely expected interest rate rise. A jump in oil prices contributed to mild profit-taking.

The Fed’s Open Market Committee nudged interest rates up a quarter point, bringing the federal funds rate — the interest banks charge each other on overnight loans — to 2 percent. The market had little reaction to the rate increase, though investors closely read the Fed’s policy statement for hints about what lies ahead. Analysts took it as a good sign that the language in the statement was largely unchanged.

“This gives a very positive tone to their outlook on the U.S. economy, despite higher energy prices,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. “There’s nothing to fear on the inflation front from where they sit, and they see flexibility in the labor market, which suggests they will allow faster job growth to show itself without having to move any quicker on rate changes.”

The Dow Jones Industrial Average was down 0.89, or 0.01 percent, at 10,385.48.

The broader gauges were narrowly mixed. The Standard & Poor’s 500 Index added 1.17, or 0.10 percent, to 1,162.91. The Nasdaq Composite Index fell 8.77, or 0.43 percent, to 2,034.56, reflecting investors’ disappointment with Cisco Systems.

Cisco shed $1.31, or 6.6 percent, to $18.44, after issuing results that met profit expectations but missed sales forecasts. Growth at the world’s leading maker of routers and switches that move data over computer networks remains strong despite cautious spending by its corporate customers, but management warned that it could face increased competition, particularly from Asia-based rivals.

Despite relatively good economic news, overall trading was tepid, particularly in the face of volatile oil prices. The government’s weekly report on petroleum inventories showed another decline in the nation’s supply of distillate fuels, which include heating oil. Separately, the International Energy Agency, the energy adviser to 26 industrialized nations, indicated worries over a global heating oil supply crunch were easing. Light, sweet crude for December delivery settled up $1.49 at $48.86, pressuring equities.

Still, traders noted that the stock market was holding up extremely well, particularly after several weeks of strong gains.

“The market is kind of meandering today,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “We’ve had a tremendous rally over the last three weeks, so now I think the market is feeling just a little overdone. Oil is up a buck-fifty, so people are taking some profits. To me, the best thing is that we’re still seeing money put to work. As long as we keep seeing inflows, we’ll be able to stay at these lofty levels.”

Meanwhile, the Commerce Department said the U.S. trade deficit shrank to $51.6 billion in September, a 3.7 percent drop from August as exports posted their best month on record. The latest snapshot of trade activity showed exports of goods and services grew to a record $97.5 billion in September. Exports were helped by a weaker dollar, which makes U.S. goods cheaper for foreign buyers, and improving foreign demand.

Imports registered a dip, but the reading was still the second-highest on record, a testimony to Americans’ solid appetite for foreign-made items.

Intel Corp. was down 22 cents at $22.86 after the chipmaker doubled its quarterly dividend to 8 cents per share and said it would buy back 500 million shares of common stock, expanding an ongoing share repurchase program. Companies often buy back stock when they are trying to boost share prices.

Federated Department Stores Inc. was up 5 cents at $53.85 as a rise in fiscal third-quarter earnings topped analysts’ expectations, thanks to improved sales performance in October. The operator of Macy’s and Bloomingdale’s department stores beat per-share estimates by 3 cents.

Advancing issues outnumbered decliners about 3 to 2 on the New York Stock Exchange. Preliminary consolidated volume came to 1.91 billion shares, compared with 1.86 billion on Tuesday.

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