- The Washington Times - Wednesday, May 10, 2006

Cisco leads tech share decline


Stocks dropped yesterday as the Federal Reserve damped speculation about a pause in its almost two-year series of interest-rate increases.

Technology shares led the retreat after Cisco Systems forecast sales that trailed some estimates. Gains in Walt Disney and General Motors enabled the Dow Jones Industrial Average to rise for a fifth day.

“The fact that they indicated there may be more hikes to come is not what the market was hoping for,” said Timothy Ghriskey of Solaris Asset Management.

The Nasdaq Composite Index dropped 17.51, or 0.8 percent, to 2320.74, led by the retreat in Cisco. The Dow rose 2.88 to 11,642.65, within 81 points of its record. The Standard & Poor’s 500 declined 2.29, or 0.2 percent, to 1322.85.

“What the market was expecting and got was some element of wiggle room,” said Alan Gayle of Trusco Capital Management in Richmond. “Given that the Fed is in a data dependent mode, this is about the closest the market can expect to hints of a pause.”

Cisco lost 93 cents to $20.75. Chief Executive Officer John Chambers predicted fourth-quarter sales growth of 18 percent to 21 percent, compared with the average analyst estimate of 20 percent. Mr. Chambers said first-quarter 2007 order growth will be at the low end of a 10 percent to 12 percent range, disappointing some analysts.

Cisco’s drop led a gauge of computer-related shares down 1.1 percent for the biggest loss among 10 S&P; 500 groups. Texas Instruments retreated 64 cents to $33.70.

Disney added 53 cents to $30.11 as profit beat some expectations. Earnings increased to 37 cents a share as sales rose at theme parks and hit shows such as “Grey’s Anatomy” boosted ad sales for ABC.

GM added $1.04, or 4.1 percent, to $26.59, for the top gain in the Dow average. The company’s bonds were raised to “overweight” by CreditSights on optimism GM’s former parts-making unit, Delphi, will reach an agreement with its unions.

Shares of Legg Mason and Teva Pharmaceutical declined as their results disappointed.

Baltimore’s Legg Mason, the No. 5 U.S. money manager, dropped $8.46, or 7.3 percent, to $108.06 for the steepest loss in the S&P; 500. Quarterly profit was $1.03 following the purchase of Citigroup’s money management unit. Analysts predicted as much as $1.25.

Teva’s shares fell $5.35 to $37.56. The world’s No. 1 generic-drug maker had a first-quarter loss of $1.40 a share, compared with a profit of 31 cents a year ago, on costs related to purchasing Ivax Corp. Excluding those costs, Teva earned 37 cents, trailing the 41-cent estimate.

Navistar International Corp., the world’s No. 4 truckmaker, jumped $2.68, or 11 percent, to $27.99 for the S&P; 500’s best performance. Citing strong sales, the company said fiscal 2006 per-share profit will be more than the $5.38 expected on average by seven analysts in a Thomson survey. Navistar hasn’t issued earnings statements since September.

MetLife, the largest U.S. life insurer, gained $1.10 to $53.19 after Lehman Brothers raised its rating on the shares to “overweight” from “equal-weight.” Lehman said that earnings from private-equity investing will drive better-than-expected profit. The company assumed private equity and other variable income may total $1.1 billion, while Lehman expects that figure to exceed $1.5 billion.

Whirlpool Corp. slipped 92 cents to $92.17. The world’s largest appliance maker said it will close three factories and cut 4,500 jobs as it reduces costs following the purchase of Maytag Corp. Whirlpool plans to give an updated earnings forecast May 23.

Federated slumped 97 cents to $77.98. The No. 2 U.S. department store operator said excluding some costs related to buying May Department Stores Co., it had profit of 2 cents a share in the fiscal first quarter ended April 29. Same-store sales were unchanged, the worst performance in almost three years.

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