MarketView for May 9

Summary

The major equity indexes chalked up negative numbers for the fifth day in six as much of the Street’s attention and concern focused on the turmoil in Europe. Nonetheless, news that Greece will receive its latest debt bailout payment helped cut losses late in the session with the result that the Nasdaq briefly turned positive and the S&P rose to break-as a result.

The turmoil in Europe has driven stock prices downward and as a result investors are hedging against possible additional losses. The Dow Jones Industrial Average fell for the sixth straight day and the S&P touched a two-month low before cutting losses.

The CBOE Volatility index, Wall Street's "fear gauge," rose 5.8 percent to 20.15, the highest close in two months.

The yield on the 10-year Spanish bond climbed above 6 percent, seen as a troublesome level among investors, after Spain said it will demand banks set aside another 35 billion euros ($45 billion) against loans to the ailing building sector. Huge bank losses have raised fears that the country may need an international bailout. Shares of Banco Santander SA fell 6 percent to close at $6.01.

Despite the late-day rebound, eight of 10 S&P sectors ended the day lower, and nearly two stocks fell for every one that rose on the Big Board.

After the market closed shares of Cisco Systems fell 8.3 percent to $17.23 in extended trading. Cisco beat quarterly earnings estimates, but the network-equipment maker forecast earnings below Street expectations.

Walt Disney reported quarterly earnings that exceeded expectations late on Tuesday on strong theme park attendance and cable advertising revenue. Shares of Disney, a Dow component, rose 1.6 percent to $45.02, after earlier hitting a lifetime high at $45.80. The success of its superhero movie, "The Avengers," also helped Disney's stock.

Macy's saw its earnings rise more than expected, but the stock fell 3.7 percent to $38.05 on disappointment that the department-store chain did not raise its outlook.

With 441 of the S&P 500 companies reporting results through Wednesday morning, 66.7 percent exceeded estimates, according to Thomson Reuters data. That was down from more than 80 percent at the start of earnings season.

Approximately 7.79 billion shares changed hands on the three major equity exchanges, a number that was above the daily average of around 6.8 billion shares.

Gold at Low for Year

Gold prices hit the lowest level of the year Wednesday as uncertainty about Europe's political and economic future dominated world financial markets. Gold for June delivery dropped $10.30 to finish at $1,594.20 an ounce, which was the lowest price since Dec. 30 when it ended at $1,566.80 an ounce.

Gold prices have fallen three consecutive days as Europe's debt crisis took center stage again. Borrowing rates increased in Italy and Spain. That added to pressure on the market created when supporters of tough spending measures designed to curb debt were removed from office in weekend elections.

Investors are worried that the unsettled situation will affect the Europe's recovery and perhaps hurt the global economy. Some sold gold to have cash accessible in case other buying opportunities occurred.

In addition, the dollar has been stronger against other currencies. Gold and other commodities are priced in dollars so a stronger dollar makes them more expensive for traders using other currencies, such as the Japanese yen.

Until there is some clarification about the situation in Europe, many analysts expect commodities to remain under pressure.

May silver fell 21.7 cents to finish at $29.197 per ounce, May copper dropped 1.6 cents to $3.6695 per pound, July platinum declined $9.10 to $1,499.20 an ounce and June palladium decreased $9.20 to $613.65.

Cisco’s Outlook Disappoints

Cisco Systems forecast quarterly earnings below Street's expectations, accentuating concerns about global technology spending and the network equipment maker's ability to weather persistent economic weakness. As a result, Cisco’s share price slid more than 8 percent after hours, despite exceeding the consensus earnings estimate for fiscal third-quarter by a penny.

The company, which Chief Executive John Chambers a year ago admitted had "lost its way" after several quarters of sub-par growth, forecast revenue growth of 2 to 5 percent in the fourth quarter. That translates into revenue of about $11.4 billion to almost $11.8 billion this quarter, lagging Wall Street's average forecast of $12 billion.

Cisco also estimated earnings of 44 to 46 cents a share, excluding items, in the fiscal fourth quarter ending in July. The Street had expected 49 cents a share.

Chambers acknowledged that it was it was "really hard to read" what would happen in the second half the year but added that customers have said their plans were to spend more in that period.

Shares in Cisco, whose rivals include Hewlett-Packard and Juniper Networks, slid to $17.23 in extended trading from a close of $18.78 on Nasdaq. The Street’s expectation had been for a solid quarter driven by domestic enterprise and commercial demand, as well as gains in the router and switches markets, offsetting weakness in the public sector and Europe.

Total third-quarter revenue rose 6.6 percent from the year-ago quarter to $11.59 billion, compared with a Street view of $11.58 billion, the company said on Wednesday. It posted a 5 percent jump in revenue from its core business of network switching in the same quarter.

In its Europe, Middle East and Africa region, revenue rose just 4.6 percent, while U.S. revenue was up an even more anemic 3.2 percent from a year earlier. Earnings, excluding items, were 48 cents per share.