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August 15, 2013 6:20 pm
US equities sold off broadly on Thursday with IT equipment maker Cisco down after warning on global demand and cutting 5 per cent of its workforce.
Cisco shares dropped 7.2 per cent to $24.49 on the news, released after the bell on Wednesday.
John Chambers, chief executive, said macroeconomic conditions, particularly a slowdown in emerging markets, had forced the company to scale back sales expectations for the next quarter.
However, analysts remained positive on the company’s shares, which are up almost 25 per cent on the year to date.
“The stock has enjoyed a strong recent run and it is our perception that it has become a consensus holding; a combination we suspect could result in some near-term selling now that the positive momentum in earnings revisions has stalled,” Nomura analysts said in a note.
“We continue to believe Cisco is executing well relative to traditional competitors while current challenges are mostly a function of macroeconomic inconsistencies,” said Jayson Noland, an analyst at Baird.
Cisco’s was the worst performer on all three major indices on a day that saw heavy selling as interest rates rose.
The S&P 500 fell 1.4 per cent to 1,661.32, and its worst day since June – the last time US interest rates spiked. On Thursday, the US 10-year bond reached 2.82 per cent, its highest level in two years.
Technology stocks were under particular pressure, with the sector down 1.8 per cent. Google fell 1.2 per cent to $859.56, Oracle dropped 2.5 per cent to $32.73, Microsoft was 1.7 per cent lower to $31.79 and Hewlett-Packard fell 4.5 per cent to $25.95.
The Dow Jones Industrial Average traded dropped 1.5 per cent to 15,112.19, and the Nasdaq Composite Index retreated 1.7 per cent to 3,606.12.
The rise in interest rates also hit banks, which have fared well in 2013 as low rates have helped spur a revival of US mortgage business.
Reits, which invest in real estate and are also sensitive to interest rate moves, also saw broad investor selling. The Dow Jones Equity All Reit Total Return Index was off 1.9 per cent to 1,130.23.
Walmart dropped after the company reported an unexpected fall in US sales and cut its sales outlook for the year.
Shares in the world’s biggest retailer were off 2.6 per cent to $74.41 and have lagged behind the broader market in 2013 with a 9.1 per cent rise.
Walmart’s disappointing earnings come after similarly tepid results from Macy’s, which is off more than 4.5 per cent in the past two days.
Estée Lauder was one of the few bright spots, with shares up 3.4 per cent to $67.36. The cosmetics business reported earnings that beat estimates.
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