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VOL. 37 | NO. 45 | Friday, November 8, 2013

Stocks mostly higher; Cisco drags tech sector down

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NEW YORK (AP) — Stocks were mostly higher on Thursday, but a sales slump from technology giant Cisco Systems dragged other technology stocks lower.

The Dow Jones industrial average was up 45 points, or 0.3 percent, to 15,865 as of 1:55 p.m. Eastern. Other indexes also posted modest gains, however the stocks that rose the most were safe-play stocks such as utilities and health care companies, a sign that investors were avoiding risk.

Cisco reported quarterly sales after the closing bell Wednesday that came in well below what Wall Street analysts were expecting. Cisco is considered a technology industry bellwether because it manufacturers equipment that makes up the backbone of the Internet such as routers and servers. Its results are also seen as a proxy for business spending on technology.

Cisco said its revenue for the current quarter could fall as much as 10 percent from a year ago. The company's chief executive, John Chambers, blamed the 16-day partial government shutdown last month as well as the near-breach of the nation's borrowing limit for the slump.

"The shutdown, debt ceiling negotiations and delay of key decisions exasperated the lack of confidence among business leaders we had highlighted over the past few quarters," Chambers said in a conference call with analysts.

Cisco sank $2.93, or 12 percent, to $21.07, pulling other large technology companies down with it. Hewlett-Packard lost $1.56, or 6 percent, to $24.93 and IBM fell $1.28, or 0.7 percent, to $182.20.

At least one investor felt that Wall Street was overreacting to Cisco's results.

"Everything seemed hunky-dory in tech and then Cisco comes out and says this ... it stands out to me as a little bit of anomaly," said Daniel Morgan, a portfolio manager at Synovus Trust Company, who focuses mostly on technology investments.

Morgan noted that since a significant portion Cisco's sales come from government contracts, it is not surprise that the company's results suffered last quarter. "It's a concern, but I don't think this is a reason to rethink my whole strategy," he said.

The Standard & Poor's 500 index was up 6 points, or 0.4 percent, to 1,788 and the Nasdaq composite was mostly unchanged at 3,965.

Some of the biggest gains were in "defensive" stocks, which tend to hold up better during market downturns, and stocks that pay higher-than-average dividends. Northeast Utilities, New England's largest utility company, was up 2 percent. Oil refining companies Valero Energy and Marathon Petroleum were both up more than 4 percent. Waste Management rose 2 percent.

The Dow Jones utility index, which is made up of 15 large utility companies, was up nearly 1 percent. At the same time the Russell 2000 index, whose members is mostly smaller, riskier companies, was down nearly 0.3 percent.

The fact that investors were favoring safe-play, high-income stocks suggested that they might be becoming more risk-averse. The S&P 500 is up more than 25 percent this year, and an increasing number of large investors have said the market might have risen too far, too fast.

"The legion of people in the last three months who think this market has topped out has grown significantly, but still the path of least resistance for this market is up," said JJ Kinahan, chief strategist at TD Ameritrade.

Investors also had their ears turned to Washington, D.C., where Jane Yellen, who has been nominated to replace Ben Bernanke as the lead of the Federal Reserve, testified in front of the Senate Banking Committee.

Yellen made no indication she would deviate from the low-interest rate policy that the outgoing chairman, Ben Bernanke, championed. She also would not specify when the central bank might begin scaling back its $85 billion-per-month in bond purchases, which are aimed at keeping long-term interest rates low to encourage borrowing and hiring.

Also of note, when asked her opinion about the recent rally in stock prices, Yellen said stocks "are not in bubble territory."

Two stocks rose sharply on their first day of trading. Textbook publisher Houghton Mifflin Harcourt climbed $3, or 25 percent, to $15. Tandem Diabetes Care, a medical device company, jumped $3.94, or 26 percent, to $18.94.

In U.S. government bond trading, the yield on the 10-year Treasury note was unchanged at 2.70 percent.

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