It’s been a tough day for two of the nation’s biggest bellwethers.
First, tech giant Cisco Systems guided lower and then the real biggie–Wal-Mart–revealed that its recent sales were well below analyst’s expectations.
Together they helped to put a lid on the markets today.
A bellwether, by the way, is loosely defined as anything that tends to create, influence or set trends.
It comes from the Middle English word “bellewether” and has nothing actually to do with the “weather” as we know it. It actually refers to the practice of putting a bell around the neck of a castrated ram (a wether) so that it may lead its flock of sheep.
So here’s the clang, clang, clang, that’s leading the market lower.
From Bloomberg by Heather Burke entitled: Sales at U.S. Retailers Languish on Recession Concern.
“Sales at U.S. retailers languished in January as discounts failed to lure consumers concerned that a recession is coming. Macy’s Inc. and Nordstrom Inc. reported declines, while the gain at Wal-Mart Stores Inc. was less than analysts estimated.
Sales at stores open at least a year rose 0.5 percent at Wal-Mart as winter storms discouraged shoppers in the Midwest and fewer customers redeemed gift cards. The monthly increase among retailers was also 0.5 percent, the worst January since 1970, the International Council of Shopping Centers said today.
Department stores and mall-based shops slashed prices on clothing and bedding to attract customers following the slowest holiday season since 2002. Consumers refrained from spending as median home values probably fell for the first time since the Great Depression and employers cut back on hiring.
“You’re seeing the continuing unfolding of the consumer spending slowdown,” said Ken Perkins, president of Retail Metrics LLC, a Swampscott, Massachusetts-based research firm. ‘Clearance sales were widespread, there were certainly enough incentives to draw the consumer in under normal economic circumstances, but consumers are hunkering down.'”
Meanwhile, bad guidance from Cisco System’s John Chambers put not only his company but the entire tech sector under pressure. In short, it was like Halloween all over again.
From Bloomberg again, by Vivek Shankar entitled: Cisco Slides as Chambers Says Slump May Last Months.
“Cisco Systems Inc., the biggest maker of computer-networking equipment, fell as much as 5.7 percent in Nasdaq trading after Chief Executive Officer John Chambers said a sales slump may last months.
Third-quarter revenue will grow 10 percent, Chambers said yesterday on a conference call, falling short of the 15 percent predicted by analysts in a Bloomberg survey. It was the second straight quarter that his sales forecast disappointed investors.
The outlook fueled concern that a slowdown in U.S. technology spending is spreading overseas. Sales in both the U.S. and Europe grew less in January than predicted, Chambers said. Customers are “cautious,” he said, and that may continue for the next several months.
U.S. orders grew 12 percent, compared with 13 percent in the previous period, Chambers said. European orders slowed to 8 percent from 20 percent as telephone companies cut spending.
“That’s good, but that’s not great,” Chambers said in an interview. “If you add the U.S. and Europe together, that’s 70 percent of my business.”
‘It’s hard to tell if the economy will have a “soft landing,’ Chambers said. ‘I don’t think anybody really knows, including the key economists.'”
That marked the second consecutive quarter in which San Jose, Calif.-based company issued a lower-than-expected forecast, crushing the tech sector in its wake.
In the company’s last report for the first quarter issued in November, cautious comments from CEO John Chambers about the high-tech environment led to a sharp selloff that pushed the Nasdaq to give up all of its gains made in the last year.
Clang…Clang….Clang…
