The Dow Ekes Out Gains Despite Cisco's Catastrophic Collapse

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Federal Reserve's likely successor to Chairman Ben Bernanke is giving the markets some optimism today: The Dow Jones Industrial Average (DJINDICES: ^DJI  ) has gained about 50 points as of 3:25 p.m. EDT following a confirmation hearing for Fed chair candidate Janet Yellen.

Despite the optimism, one big tech stock's huge misfire has shareholders reeling. Cisco (NASDAQ: CSCO  ) has taken a dive into a Wall Street ravine today, putting a damper on the rest of the Dow. Let's catch up on all the action.

Headed to the Fed
First, we'll catch up with Yellen's latest good news for a fickle investment world. Wall Street has taken a kind eye to Yellen's words in today's Senate confirmation hearing, as the Fed leader nominee espoused continuing loose monetary policy until the economy shows stronger growth. Dovish monetary policy has helped stocks surge this year, but falling unemployment throughout 2013 has had investors worried about the possibility that quantitative easing could be tapered off.

That won't be the case if Yellen gets her way -- not until Main Street shows better results. Many observers expect Yellen to clear the Senate confirmation process without a hitch, which would help bring certainty to the near future of central-bank policy and ease investor concerns over possible tapering -- concerns that have been shown by volatile day-to-day swings in the markets over the past few months. For the long-term investor, tapering and quantitative easing aren't so important, but Yellen's impact as a dovish Fed chair could make waves over the markets on a broader scale over the next few years.

None of that's going to help Cisco today, however. This leading tech stock has hit the skids in a huge way, as shares have plunged by more than 11%. Cisco reported first-quarter results today, with revenue growing 2% year over year and earnings down 5%, missing analyst forecasts. But that wasn't the biggest news out of this tech titan.

The company projected that revenue for the current quarter could fall by as much as 10%. That's a shocking blow to analysts and Wall Street, especially as observers had predicted 4% sales growth on average for the quarter that ends in January. That sparked numerous price target cuts and even a few stock downgrades across the Street today.

Cisco CEO John Chambers is working to turn around this sinking stock with cost-cutting measures such as employee reductions. Still, that might not be enough to save Cisco's performance, especially as the company cited political influence in China negatively impacting its sales.

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8/26/2016 4:32 PM
^DJI $18395.40 Down -53.01 -0.29%
CSCO $31.35 Up +0.06 +0.19%
Cisco Systems CAPS Rating: ****