Market briefing --- Matt (slow)
Interest rates --- Carmen (fast)
NYSE --- Deb (fast)
welcome to “world financial report.” i am matt nesto. let’s talk about the closing numbers here today. interesting not so much for huge percentage declines but for milestones that were eroded, particularly the dow jones industrial average slipping below 10,000 for the first time in five months. it was early december, folks. 9,990. dow 1.25%. 1% decline for the s&p. nasdaq down 1% today. caterpillar the big drag on the market down 5% today. look at bond market . comparably steady and mixed as you see. 10-year note down. the yield picking up almost at 4.80%. five-year inching higher. really little change. shorter, little change there. look at the currency mark. the latest trade shows no change there. the dollar index was strong today. the yen beaten down to an eight- month low. the dollar index surging to a five-month high. stocks tumble in part on concern of interest rates, that they could soon be rising. carmen roberts has been tracking this beat and joins us with the details.
>> exactly. investors are wrestling with several issues right now, matt. they’re interest rates, energy prices, iraq and the presidential election. investors are concerned that the federal reserve may boost interest rates as soon as next month putting the brakes on economic growth. the concern is worldwide with benchmark indexes in asia and europe also slumping.
>> i think stocks will be driven quite a bit going forward by what happens with interest rates. as you look at what is going on with stocks, they can’t be better. 20% year over year earnings growth. a number of companies beating expectations actually have set a record in the current quarter. things are strong fundamentally.
>> he helps oversee $6 billion at julius baer investment management. he says everyone knows rates will go up. the question is when and by how much. speculation in rates rising sooner than many skpbged increased on friday after the jobs report showed u.s. companies added 288,000 workers in april. that strengthened the central bank’s case to start raising rates. christopher lowe sees the market down turn as a short-term situation.
>> i think the stock market is overreacting, partly because the stock market has gone through a significant correction in the last few years anyway. p/e’s are very low. earnings news hasn’t just been good, it’s been great. it’s been great for four quarters. i think stocks will come out of this funk pretty quickly.
>> worries about violence in iraq as well as controversy over prisoner abuse making traders nervous. the situation is clouding the presidential election creating more uncertainty. a selloff in energy-related stocks which had risen as crude prices reached $40 a barrel on friday, highest in 13 years. as one equity strategist tells us, investors should be worried. a manager of $9 billion in brussels says things are in place for a slowdown in the second half of the year and for 2005. matt?
>> i love the story. fun to follow.
>> we will be. thank you, carmen. quite a debate. broad-based decline in equities. more than 85% of shares traded on the new york stock exchange today were down. deborah kostroun is down there among the wreckage. deb, what have you got?
>> as we closed out today’s session, we have the dow, s&p and nasdaq all at its lowest level of the year. dow and nasdaq below their 200- day moving averages. the dow pretty much teetering on that today at 10,500. it will be a level that many technical traders will look at. also it’s our hef kwrs volume for the year at new york stock exchange today. 1.9 billion shares. really kind of gives credence to the downward move. something we have seen recently. heavy volume on the down days. this is compounded with concern over the eminent rate hike we’ll be seeing. also the dollar rising against the euro and yen. the dollar actually rose close to an eight-month high against the yen and gaping against the euro. a lot of concerns coming in to play in today’s market . take a look at where we stand year to date now since we’re at lowest level of the year. dow down 4.4% just this year. s&p down 2.2%. nasdaq down 5.4%. we saw a lot of lows today. new 52-week lows. 781 new 52-week lows. 64 new highs. definitely in favor of the down market in today’s session. also, oil stocks, that was the biggest drag on the market today. that as crude oil falls from the 13-year high. that after the saudi arabian oil minister called on opec to increase production. that left oil, oil services sharply lower in the session. and then also financials another big drag on the market . that after citigroup said they would set aside $5 billion in the second quarter to cover legal costs including a settlement with worldcom. that also upgraded along with j.p. morgan by prudential financial. financials sharply lower in the session. gold one of the biggest winners especially with the dollar rising. back to you in the studio.
>> thanks, deb. appreciate it very much. tough day for investors betting the stock market will go higher. cisco systems tomorrow could report and is expected to report its largest sales increase in three years. this, of course, when the company releases its earnings after the close of trading tuesday. now analysts say chief executive john chambers’ priority is to expand business beyond the company’s core units of routers and switches. to boost sales, the 54-year-old c.e.o. is putting his focus on cisco’s so-called advance technology unit which includes six product lines ranging from network security to internet telephone equipment. those business now account for 15% of revenue up from 10% a year ago.
>> these are growth drivers that they’re hoping will be growth services for the future. these are getting close to the $1 billion segments for cisco. i think that will continue to accelerate. they’re betting a lot on the growth segments. looks like they’re dog well in those areas right now.
>> u.b.s. forecast srpsed tbg tpholg revenue climbing 77%. he is seeing it at $858 million for the fiscal third quarter while router sales are expected, according to him, to rise 21% to over $1.4 billion. total revenue from switches increasing 12% to $2.1 billion. analysts say this probably helped boost quarterly profit excluding some costs to 1.27 billion, 18 cents a share. total sales for the quarter probably shot up 20% from a year ago to $5.5 billion. last time sales gains topped 20% was back in 2001. armada funds say cisco is aougs its customer base to sell more of its newer products and that is giving the company an edge over competitors.
>> they have got this great relationships that they built up over the years at the enterprise. they are saying we can do a whole new communications infrastructure for your company at much lower costs. right away companies are listening.
>> if we take a look at cisco shares or what chamber sincere saying, each advanced technology unit has a potential to be a billion dollar market . analysts and investors say it could take three to five years before that happened. let’s go to the terminal for a closer look before tomorrow’s bigger action. i put together a 15-year chart. it’s a log rhythmic chart which tracks percentage gains. you can see the exponential gain of cisco from 1990 to 2000, the decline an then the lagging area. this chart show it is all. all time high around $80 a share and then the lag area. let’s focus on the lag area. thaeu put in this box on the bloomberg. this is essentially a $10 trading range between $15 and $25 a share going back to 2001. you can see that the stock for the vast majority of that time has been stuck in that trading range of about $10 up or down give or take. if we zoom that in and check out technical indicators of this particular stock, you can seat trough to date rally coming from april here all the way up until the high watermark of $29 a share. you can see the decline coming in the aftermath. the stock was up 235% from that october low at that point. stay with us because we’ll get more on the cisco story. owens fitzpatrick is changing his investment strategy because of interest rates poised to rise. he will tell us more about that, up next.
