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Cisco pre-announces and futures get green

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Shares of networking giant Cisco Systems (NASDAQ:CSCO) jumped 4% higher in pre-market action to $19.25 after the company said an internal memo regarding its fiscal 2002 financial results was prematurely and inadvertently distributed to a large number of employees after the close of trading yesterday.

"So as to minimize any potential confusion, the results we announce this afternoon will exceed the current consensus estimates of earnings per share and revenues for the second quarter of our fiscal year," the company said. Full quarterly results will be released after the close of trading today.

Consensus estimates are for Cisco (CSCO) to report earnings of $0.05 a share.

Futures green

Stock futures were mixed prior to this morning's announcement by Cisco (CSCO), but are on the mend and showing gains. S&P futures (sp02h) are higher by 3.6 points at $1,092.50, NASDAQ futures (nd02h) are up 24 points at $1,486 and Dow futures (dj02h) are up 5 points at $9,665.

Fair value for the S&P 500 today is $0.32. HL Camp & Company has their computers set for program buying at $1.76 and set for program selling at $-1.08. Fair value for the NASDAQ-100 today is $2.90.

Gold breaks above $300

February Gold futures (gc02g) have broken the "infamous" $300 level this morning and currently are trading at the $303.50 level after achieving a morning high of $308 per ounce. My advice to traders that are in some gold plays that we've mentioned in the past month should simply be using a strategy of raising stops to help assure profits.

Perhaps part of the reason gold futures are jumping higher this morning is reports out of Europe that Ireland's largest bank, Allied Irish, plunged after it announced it was investigating fraud at one of its U.S. units. Early reports are that the fraud is limited to a trader that may have been reporting false trading profits in order to cover up real losses in positions held.

Productivity jumps 3.5%

One economic number I felt loomed large this week was today's non-farm productivity number. For the 4th quarter ending in December, productivity rose 3.5%, which was better than the 3.1% consensus. This resulted in a unit labor cost decline of 1.1%. This will help put a smile on the Feds face as it views potential inflation. The higher rate of productivity is a key part of the "inflation equation" from the Feds perspective and today's number should help squash potential fears of inflation and perhaps give the Fed room to cut interest rates if needed. Today's productivity should bode well for stocks near-term, but the question remains of just how other lingering negatives in the market on the accounting front will weigh on investors minds? Unfortunately, nobody really knows the answer, but right now there are positive forces at work on the economic side of things.

Jeff Bailey
Senior Market Technician
Option Investor

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