Stocks might rise Wednesday morning following a strong earnings report from Cisco Systems (CSCO) and data that showed productivity rising more than expected during the fourth quarter of 2006. Forty-five minutes before the opening bell on Wall Street, stock index futures indicated that the Dow Jones Industrials ($INDU) might add 15 to 20 points in early trading. The NASDAQ ($COMPQ) might add 5 or 10.
Shares of Cisco Systems are trading higher after the largest maker of computer networking equipment reported fiscal second quarter earnings of 33 cents a share, which topped analyst estimates by a nickel. Revenues rose 27% and more than expected. Cisco also raised revenue guidance for the current quarter. Shares jumped $1.20 to 28.48 on the news.
Among the other stocks to watch Wednesday, Broadcom (BRCM) is trading up $1.20 to $33.19 after Morgan Stanley raised the stock to "overweight" from "underweight." Tyco (TYC) is trading lower after Deutsche Bank analysts cut the stock to "hold" from "buy." Keane (KEA) is set to gap higher after Caritor, an information technology company, announced plans to buy the company for approximately $845 million. Infineon Technologies (IFX) is heading higher in overseas trading after being awarded a contract to supply chips for Nokia phones. BHP Billiton (BHP) is also on the move after announcing a $10 billion share buyback program, which was larger than expected.
In economic news, a report released early in the day showed productivity rising more than expected during the fourth quarter. According to the Labor Department, productivity rose 3% during the final three months of 2006. Economists were looking for an increase of 2%. Meanwhile, unit labor costs, a gauge of inflation, rose 1.7% and its smallest of the year. Economists were predicting a 2.1% rise in labor cots.
Crude oil is up 50 cents to $59.38 a barrel ahead of weekly inventory data from the Energy Information Association [EIA]. The report is due out at 10:30 a.m. Eastern time. Freezing weather in the Northeast might have cut into fuel supplies.
Yet, while oil prices are making another run towards $60.00 a barrel, the day's other news is mostly positive. In addition to Cisco's earnings, Computer Sciences (CSC), XL Capital (XL), and Business Objects (BOBJ) are also out with better than expected results. Bonds are trading modestly higher following the productivity numbers and the yield on the benchmark ten-year Treasury note is now below 4.8%. Overall, there isn't much reason to expect any major changes in the market's underlying tone and, after a 4.6-point move higher on Tuesday, the Dow is expected to drift quietly higher again Wednesday morning.
Frederic Ruffy
Senior Writer
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