US stocks edge higher following Cisco forecast

Wall Street ended a fractious session slightly higher tonight after falling oil prices hurt energy stocks and overshadowed a stronger-than-expected productivity reading. A Federal Reserve official’s comments on interest rates also soured the market’s early good mood.

A robust sales forecast from Cisco Systems Inc. gave a boost to technology stocks, however. The Labor Department’s productivity figures for the fourth quarter were nearly double what had been expected, but failed to offset concerns about falling oil prices.

The productivity data initially seemed to overshadow comments from Philadelphia Fed President Charles Plosser that an improving economy might force the central bank to raise short-term interest rates.

Plosser said the productivity gains were helping consumers but that it was too soon to declare the threat of inflation neutralised.

Despite indecision shown by the Dow Jones industrials, which were up for much of the day but ended essentially flat, stocks showed moderate increases overall.

Advancing issues outnumbered decliners by about three to two on the New York Stock Exchange, where volume came to 1.48 billion shares.

The Dow inched up 0.56, or less than 0.01%, to 12,666.87. The Dow moved past 12,700 for the first time ever, trading as high as 12,700.28. The previous trading record of 12,683.93 was set on Friday.

Broader stock indicators showed comparatively substantive gains. The Standard & Poor’s 500 index rose 2.02, or 0.14%, to 1,450.02, and the tech-focused Nasdaq composite index, responding to Cisco’s news, rose 19.01, or 0.77%, to 2,490.50.

Bonds rose following the economic data, with the yield on the benchmark 10-year Treasury note falling to 4.74% from 4.77% late yesterday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell $1.17 to $57.71 per barrel on the New York Mercantile Exchange. It had been up briefly after the Energy Department’s weekly domestic inventory data showed a small decrease in crude stockpiles.

“Crude hasn’t been able to get above $60 for three days so the energy names are weak,” said Neil Massa, equity trader at John Hancock Funds. He suggested some investors were simply taking profits.

Massa also said that on further reflection, investors might have been unnerved by Plosser’s comments.

“He was talking pretty hawkishly on inflation,” Massa said of Plosser. “I think that’s kind of getting into the numbers that a rate cut seems a longer way off than we had originally thought if at all at this point.”

Investors found encouragement in the productivity data because it suggested employers could extract more work from employees and stave off the need to add workers in a tight labour market.

Employers forced to compete for workers would probably have to raise pay and other benefits.

Such a prospect would draw concern on Wall Street as the Fed remains watchful of an increase in wage inflation.

Last week, the Fed left rates unchanged for the fifth straight time, interrupting a string of 17 straight increases than began in 2004. In comments accompanying the decision, the Fed said inflationary pressures appeared to be in check, though still a concern.

After an initial burst higher following the comments on inflation, stocks have shown little movement as bullish investors try to gather the resolve to move higher.

Investors appeared unaffected by a Fed report this afternoon that found credit-card debt increased at the slowest pace in nine months. Consumer credit grew at a 3% annual rate in December, which marked the smallest increase since October and was well below the 6.9% jump seen in November.

Al Goldman, chief market strategist with AG Edwards & Sons, said today’s trading reflects “a normal pause” and, more specifically, a pullback in the energy companies.

“The price of oil dropped dramatically and they tend to be major factors over all,” he said of the energy companies.

Still, he remains confident in the market’s prospects.

“We’ve come a long way and we’re just taking a time out.”

Among energy stocks moving lower following the drop in oil, Exxon Mobil Corporation, part of the Dow industrials, was off 39c at $74.76, while Chevron Corp. fell 70c to $72.67. ConocoPhillips slipped 64c to $66.

In corporate news, Cisco rose 81c, or 3%, to $28.09 after the networking equipment maker predicted its third-quarter revenue would rise 19% to 20%.

News Corp. advanced 55c, or 2.3%, to $24.70 after the media conglomerate’s fiscal second-quarter earnings fell from those of a year ago, which benefited from a gain on an asset sale.

The company’s box-office earnings rose on several hits including the Borat movie. Earnings were stronger than expected and the stock set a new 52-week high of $25.35, topping an earlier high of $24.52.

Multi-Fineline Electronix Incorporated, which makes circuit boards, rose $2.70, or 15.4% to $20.28 although its fiscal first-quarter profit came in below Wall Street’s expectation. Some analysts suggested the company’s revenue had hit a low point.

Appliance maker Whirlpool Corp. saw its fourth-quarter earnings fall 14% as it recorded a loss from discontinued operations. The stock fell $2.54, or 2.7%, to $92.36.

The Russell 2000 index of smaller companies was up 5.79, or 0.71%, at 816.20.