8:45am (EST)
The bears bounced back on Wednesday as they got an early jump at the start of trading and kept the bulls under water all session. There were two main factors (and maybe a third) driving the market lower and they were a higher dollar and lower commodity prices. And perhaps, the conviction of hedge fund manager Raj Rajaratnam who was found guilty on all counts of insider trading yesterday and gave Wall Street another black eye.
There was a slight rebound off the lows going into the closing bell as traders looked for a good round of earnings in after-hours trading. However, they were disappointed as the market still closed with a 1% loss and after Cisco Systems (CSCO, $17.78, down $0.01) offered a less-than-rosy forecast. More on this story in a minute.
Oil fell over 5% and closed at $98-and change (a barrel) on the rise in the dollar, higher inventories, and other factors. Gold and silver were also down, finishing at $1,500 and $35 an ounce, respectively.
As a result, the Dow fell 130 points to finish at 12,630 after touching a low of 12,577. Short-term support is at 12,500 which we mentioned on Monday morning, then 12,350.
The S&P dropped 15 points to settle at 1,342. The index traded to a low of 1,336 and finished below 1,350 which favors the bears. There is further downside risk to 1,325 and a crack below this level brings 1,300 back into the picture.
The Nasdaq tanked 27 points and closed at 2,845. Tech fell below our 2,850 make-or-break target and touched a low of 2,829. The bears will target the 2,800 level today while the bulls try to hold the fort down. A break below 2,800 could spark panic.
Futures are pointing towards a weak opening after Cisco Systems beat estimates but disappointed on its outlook for the current quarter. The stock surged 4% in after-hours when traders learned the company beat estimates by 4 cents but fell over 3% after they guided lower.
Cisco gave 4Q guidance of $0.38 a share versus estimates for $0.42. Additionally, Cisco admitted it was getting its lunch eaten and said revenue would be up 2%, at best, when the kids on Wall Street had penciled in an increase of 5%.
We thought Cisco had a shot at beating earnings by a penny which they have been famous for in the past because the bar had already been lowered. Cisco needed to wow Wall Street with something positive but admitted “they had work to do”.
Cisco is at $16.95, down $0.83, in early action this morning so we will have to see how much this was baked into the cake. Shares touched $18+ in after-hours last night but could be headed back towards their 52-week low of $16.52 if the bears eat the whole pie this morning.
Dow futures are down 52 points to 12,545; S&P futures are off 6 points to 1,332; Nasdaq futures are slipping 14 points to 2,379.
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