Market Insider/Thursday Look Ahead
CNBC Executive News Editor
Cisco's downbeat earnings comments could make a dent in stocks Thursday morning. Ahead of the opening bell, investors will also be watching rate meetings by the European Central Bank and the Bank of England. The ECB is not expected to move on rates but comments from ECB President Jean-Claude Trichet at 8:30 a.m. ET could be market moving and will be closely watched.
U.S. weekly jobless claims data is reported at 8:30 a.m. January sales reports from retail chains are reported Thursday morning and already started rolling in Wednesday afternoon. Pending home sales are reported at 10 a.m., and consumer credit is reported at 3 p.m.
In Washington, Democrat majority leader Sen. Harry Reid is expected to bring up the next steps in the Senate's effort to approve an economic stimulus plan. The Senate failed to move forward on an economic stimulus vote Wednesday, leaving the plan in limbo. The Senate has been divided on whether to adopt the House bill, supported by President Bush, or go for its own more expensive package.
A few big earnings are on the calendar for Thursday, including Glaxo , Pepsi , Deutsche Bank , D.R. Horton , Unilever , Apache and Activision .
But the market may still be feeling the sting of Cisco's news. The much anticipated Cisco earnings report came in fine, right after the closing bell. Investors bid up the shares, as numbers fell in line with Wall Street estimates, but then cautious comments from CEO John Chambers on the earnings conference call knocked the wind out of Cisco shares. Chambers said the company experienced slowing order growth rates in January and that trend makes the company cautious for the next couple of months.
Chambers also said he has seen U.S. and European customers being more cautious. But Chambers also said the slowdown will be relatively short-lived. Cisco is seen as a technology bellwether, and traders have been worrying about its forecast and the implication for the rest of tech for several days. So, it was no surprise to see them take Cisco's stock down more than 7 percent after the comments.
After Tuesday's tumult, the Dow started Wednesday higher, recovered from a morning dip but then ran out of steam totally in the afternoon, follwoing comments from Philadelphia Fed President Charles Plosser and an unsettling announcement from Macy's . Macy's said earnings would be below Wall Street expectations and that it is cutting 2,300 jobs in a consolidation of divisions.
Plosser made comments on inflation that were seen as hawkish. But also disturbing to the markets was a comment about he made about the Fed's credibility. "Fortunately, so far inflation expectations have not changed very much. But they bear watching because there are some signs that they, too, are edging higher. These may be early warning signs of a weakening of our credibility, and we must be very careful to avoid that," he said.
The Dow finished the day down 65 points or 0.5 percent to 12,200. The Nasdaq fell 1.3 percent to 30.82 points to 2278, and the S&P 500 was down 10, or 0.8 percent at 1326.
"The bullish catalyst just is not clear right now," said Bill Nichols, senior managing director equities trading at Bear Stearns. "The market's telling you we're not out of the woods yet."
Stocks to Watch
In a positive move, bond insurer MBIA said after the bell Wednesday that it would raise $750 million by issuing 50 million shares. Also, airline stocks took flight in late trading after reports in the Wall Street Journal and Financial Times indicated that Delta and Northwest are closer to a merger. The Journal also said talks between UAL Corp and Continental Airlines have grown more active.
Traders expect chain store sales news Thursday to contain some grim headlines. Late Wednesday, American Eagle Outfitters said its January sales fell 7 percent. Macy's, in making its announcement, said it had a deeper than expected drop in January sales at established stores.
Specialty retailer Talbots said it sees a fourth quarter loss, excluding items, of 23 to 28 cents per share. Talbots same stores sales for the period fell six percent. It said it plans to open fewer new stores, cut spending and close 100 underperforming stores. It said January sales were in the single digits.
Stocks of Fannie Mae and Freddie Mac are also in the spotlight as the Senate Banking Committee holds a hearing on the government-sponsored enterprises.
Oil slid Wednesday after U.S. data showed a surprisingly large increase in crude and refined product supplies in the last week. Oil was down $0.31 at $86.81 per barrel.
The dollar gained 0.1 percent against the euro, but it fell 0.4 percent against the yen.
The 10-year Treasurys fell 8/32 points. Its yield rose to 3.615 percent. The two-year's yield rose to 1.964 percent.
Questions? Comments? email@example.com