[Timber Loftis]

Stocks Close Lower After Profit Taking
By REUTERS

NEW YORK (Reuters) - Stocks tumbled on Thursday, the market suffering its largest drop in three weeks, as Cisco Systems Inc. predicted little, if any, near-term revenue growth, spooking investors into pocketing profits from a month of gains.

The Dow Jones industrial average dropped 184.22 points, or 2.10 percent, to 8,586.79, according to the latest data, while the Nasdaq composite gave up 41.80 points, or 2.95 percent, at 1,377.19. The benchmark Standard & Poor's 500 fell 21.07 points, or 2.28 percent, to 902.69.

"Cisco obviously is putting down the tech stocks which have performed well recently," Joe Stocke, chief investment officer at StoneRidge Investment Partners. "So that's putting a damper on the entire market and people decided to take a little money off the table."

After the market close on Wednesday, Cisco, the No. 1 maker of equipment that directs Internet traffic, said it swung back to a quarterly net profit from a year ago but issued a cautious revenue outlook. Cisco shares, the most active on the Nasdaq market, fell 61 cents, or 4.7 percent, to $12.35.

Among other shares, TMP Worldwide Inc., the parent company of online job site Monster.com, tanked $3.16, or 20 percent, to $12.61. The company said its third-quarter earnings fell by close to half due to the persistent slump in the labor market, and warned of a similarly dismal fourth quarter.

Chip equipment makers were weighed down by losses in the shares of chip maker Advanced Micro Devices Inc. (AMD.N), the main rival to Intel Corp. (INTC.O) in the market for microprocessors, after AMD said it was cutting its capital spending next year. Intel was down almost 4 percent.

Stocks had risen on Wednesday after the Federal Reserve surprised investors with a half-percentage point cut in interest rates and after the sweeping Republican victory in Congress fanned hopes of a business-friendly administration. The Nasdaq scored its sixth straight day of gains.

But market watchers said Wall Street was still digesting the Fed's action.

``I am surprised the market wound up higher yesterday. There was a lot of negative stuff. The only positive I saw was that the Republicans won,'' said Heekin. ``To me a 50 basis point cut shows there's a pretty severe underlying weakness in the economy.''

Cisco's weak forecast lands after a slew of better-than-expected earnings reports lifted stocks for a month after hitting 5-year lows in early October. Wall Street's sentiment has taken a turn for the better, but concerns linger over the corporate outlook and the pace of economic recovery.

The technology-loaded Nasdaq Composite index (.IXIC) lost 41.54 points, or 2.93 percent, to 1,377.45. The blue-chip Dow Jones industrial average (.DJI) fell 195.25 points, or 2.23 percent, to 8,575.76. The broad Standard & Poor's 500lost 22.12 points, or 2.39 percent, to 901.64.

President Bush made his first public appearance since Republicans captured the Senate and strengthened their hold on the House of Representatives in Tuesday's midterm elections. Bush, a Republican, told a news conference he will work with the new, Republican-led Congress on new economic growth and jobs packages early next year.

``The economy has come out of a recession and is growing, but I am not satisfied because I know we can do better,'' Bush told a news conference. ``We must have an economy to grow at a faster and stronger pace so Americans can find a job and so I (will) work with (the) new Congress to pass new growth and jobs packages early next year.''

Cisco, the No. 1 maker of gear that directs Internet traffic, fell 64 cents to $12.32 and was the most active on the Nasdaq. The company posted a net profit from a year-ago loss, but said revenue in its second quarter would be flat to down as much as 4 percent from its first quarter as customers cut spending.

The cautious outlook whacked other Big Techs. Software giant Microsoft Corp. (MSFT.O) fell $1.10, or nearly 2 percent, to $55.93. Computer maker International Business Machines Corp. (IBM.N) lost $2.60, or more than 3 percent, to $78.90.

AMD fell 23 cents to $7, or 3.1 percent, and weighed on chip stocks. Chief Financial Officer Robert Rivet said AMD plans 2003 capital spending of about $650 million, down from a reduced 2002 budget of between $750 million and $800 million.

The Philadelphia semiconductor index (.SOXX) sank 7.59 percent. Intel lost 75 cents to $18.40 and Texas Instruments (TXN.N) tumbled $1.34, or 8 percent, to $15.06. Among the chip equipment makers Applied Materials (AMAT.O) lost $1.01, or 6 percent, to $15.84 and Novellus Systems (NVLS.O) lost $2.06, or 6 percent, to $31.68.

Dow stock J.P. Morgan Chase & Co. Inc. (JPM.N) fell $1.40 to $20.66 and was the most active on the Big Board. The No. 2 U.S. banking company said rumors it had suffered large losses on gold trades were ``false and irresponsible.'' Its stock dropped on rumors arising in Europe that it had lost between $17 billion and $70 billion on gold trades.

Shares of Electronic Data Systems Corp. (EDS.N) fell more than 12 percent, or $2.08, to $14.72, after consumer products giant Procter & Gamble Co. (PG.N) said it decided not to sell its back office operations to EDS, scuttling a multibillion deal weeks after an EDS profit warning put it on hold.

P&G, a Dow stock, was up 32 cents to $88.18.