Cisco Systems Crashes Wall Street

On Thursday, stock prices on Wall Street fell, primarily due to weak forecasts for further business results from technology leader Cisco Systems, as well as the strengthening of the dollar. The Dow Jones index weakened by 0.65 percent, to 11,283 points, while the S&P fell by 0.42 percent, to 1,213 points, and the Nasdaq index by 0.90 percent, to 2,555 points.

Cisco Systems disappointed investors yesterday by lowering its sales forecasts for the current quarter, due to weakness in consumer spending and orders from service providers. Cisco’s stock price plummeted by 16.2 percent, marking its largest daily drop since 1994. Cisco’s forecast called into question the thesis of a strong recovery in the technology market, leading to declines in the stock prices of other technology companies as well. Hewlett-Packard’s stock fell by 2.5 percent, Microsoft’s by 1, and IBM’s by 0.8 percent. The strengthening of the dollar also negatively impacted the market yesterday. Due to the weakening of the American currency, commodity prices have risen in recent months, which has boosted stock prices in the mining and energy sectors. However, the dollar has strengthened in recent days against the European currency, which is under pressure due to financial problems in certain Eurozone member states, primarily Ireland.

As a result, the euro exchange rate fell below the level of 1.37 dollars yesterday, while at the same time, the price of the American currency broke above the threshold of 82 yen. Investors are cautious due to the meeting of G20 leaders of the world’s largest economies in Seoul. Last week, Germany and China were very critical regarding further easing of monetary policy in the U.S., which practically diminishes the value of the dollar. On the other hand, Americans accuse the Chinese of artificially keeping their currency exchange rate low. Cautious trading was observed on European exchanges yesterday. The London FTSE index weakened by 0.03 percent, to 5,815 points, while the Paris CAC fell by 0.54 percent, to 3,867 points. The Frankfurt DAX, on the other hand, rose by 0.05 percent, to 6,723 points. (H)