A warning from EMC that 2008 will be a tough year for IT spending hit EMC and VMware shares on Tuesday, but the rest of the market gained on hopes for another big rate cut from the Federal Reserve.
EMC’s quarterly results were solid, but comments by CEO Joe Tucci that the IT spending environment is “more challenging and more uncertain” and VMware’s sales miss and warning sent EMC shares 6% lower — and spinoff VMware plunging by 34%.
Yahoo continued the trend late Tuesday, combining solid fourth-quarter results with a lukewarm outlook for 2008. Its shares fell 10% in after-hours trading.
With earnings season largely over, results have been decidedly mixed, with bellwethers like Intel, Apple and eBay disappointing with their results, while Microsoft, Sun and IBM delivered solid results. Amazon and Google will report Wednesday and Thursday, respectively, and then Cisco, HP and Dell will weigh in next month.
But aggressive rate-cutting by the Federal Reserve is raising hopes that the economy — and IT spending — won’t be in the doldrums for long. Traders have priced in about an 87% chance of another half-point rate cut from the Fed on Wednesday. Hopes for a quick recovery helped stocks rebound from an 18-month low last week.
Lexmark was a standout, surging 15% on its results.
Clearwire jumped 23% on reports that it was back in talks with Sprint on a WiMax partnership. Sprint shares gained 8% on the news.
Baidu fell 7% on a downgrade.
The Nasdaq rose 8 to 2358, the S&P gained 4 to 1362, and the Dow surged 96 to 12,480. Volume rose to 4.23 billion shares on the NYSE, and 2.24 billion on the Nasdaq. Advancers led by a 22-10 margin on the NYSE, and 17-12 on the Nasdaq. Upside volume was 67% on the NYSE, and 64% on the Nasdaq. New highs-new lows were 28-63 on the NYSE, and 43-89 on the Nasdaq.