Cisco's third quarter results may benefit most tech stocks Wednesday. Asia was mixed and Europe dipped. The Dow is set to open unchanged.
Cisco Systems Inc. (Nasdaq: CSCO) beats third quarter estimates by a penny and declares a two-for-one stock split. Good news, but not necessarily for Cisco. There could be selling on the news. On the brighter side, Cisco's rosy outlook bodes well for tech stocks as a whole, and will likely lead to gains in the Nasdaq today.
Cisco is pushing into the voice traffic market, just as Lucent Technologies Inc. (NYSE: LU) has tread in Cisco's turf: data. Cisco will go on as before, buying small parts of what it's missing and add it into its products, versus Lucent's billion-dollar acquisitions, such as Ascend Communications Inc. (Nasdaq: ASND). The $64,000 question is: What will yield results faster - the nibble or the gulp?
My money's on Cisco, but you couldn't ask for tougher competition with Lucent, which has experience integrating large companies into its own business. Get some popcorn, this is going to be a heck of a fight.
Stocks to watch for Wednesday include: Broadcom, Cisco Systems, Lycos, Harbinger, QAD and Western Wireless.
On Tuesday, technology stocks maintained their momentum from the following day. The Nasdaq composite gained 40 points to 2,366.60 while the Dow added 19 points to close at 11,026.15.
The Inter@ctive Week @Net Index climbed 10 to 331 on Tuesday.
At the Bell
The Dow Jones industrial average is set to open at a standstill. The Standard & Poor's 500 index for March futures contracts dropped 1.3 points to 1,356.9 at 7:58 a.m. EST in 24-hour electronic trading, are indicating a 10-point decline in the global bellwether.
Asia was mixed as memory chipmakers lost ground and other tech stocks were buoyed by a strong close of the Nasdaq. The Nikkei 225 in Tokyo rose 1.22 percent to 16,947, the Seoul composite in South Korea declined 1.06 percent to 773, Singapore's Strait Times index added 0.01 percent to 1,889 and Hong Kong's Hang Seng advanced 1.08 percent to 13,012.
In China, deflation continued in April, as prices fell 3.5 percent from the same period last year. China may cut interest rates to spur buying, which could mean weaker corporate profits for Chinese companies and is an indicator that efforts by the government to encourage economic expansion have yet to bear fruit.
China's economic downturn is dangerous for two reasons: China may continue its contumely over the accidental bombing of its embassy as a shunt for any dissent among its population. Poor relations with China could be bad for wireless communications companies, such as Qualcomm Inc. (Nasdaq: QCOM), which does a lot of business in the communist state.
China's downturn could also put a damper on the budding recovery that the Pacific Rim has enjoyed. China has assured in the past that it would not devalue its currency when Japan's yen neared historic lows last year. That kind of cooperation could be done with. China had been on its best behavior as it hoped to join the World Trade Organization. However, the U.S. shot down those hopes and China has nothing to lose now by pursuing its own goals.
European markets stagnated after Russia said its economy was at a standstill. London's FTSE 100 slipped 0.32 percent to 6,357, the CAC 40 in Paris lost 0.72 percent to 4,319 and the Xetra DAX in Frankfurt dropped 1.27 percent to 5,230 at 7:59 a.m. EST.
Russian President Boris Yeltsin fired his Prime Minister and cabinet because of his disappointment on the government's failure to improve the economy, which Yeltsin described as "at a standstill."
The shakeup in Russia hinders Europe on two fronts. One: many European banks have large investments in Russia and in Russian government bonds, all of which could go up in smoke.
Russia, with its Slavic ties to Yugoslavia, has been the principal diplomatic contact to Slobodan Milosovic. With Yeltsin now having to deal with finding a new cabinet, that avenue of dialogue could be curtailed.