NEW YORK, May 7 - Stocks are poised for a soft open on Wednesday as cautious comments out of the Federal Reserve and tech bellwether Cisco Systems Inc. tug against momentum from Wall Street's hefty rally over the past two months. Equity futures weakened shortly before the opening bell. On Tuesday, Federal Reserve policy-makers warned of a possible "unwelcome substantial fall in inflation," saying this meant the economy was in danger of weakness ahead. "The Federal Open Market Committee definitely threw some cold water on the market because of its cautious remarks on the economy," said Bill Strazzullo, market strategist with State Street Corp. "Going forward, the market will be watching for more clues on how the economy will look post-Iraq war. We have to see the economic data improve to justify the rally in stocks."
Equity futures erased earlier, modest gains. Standard & Poor's 500 stock index futures for June eased 3 points to 931.70, while Nasdaq futures for the same month were down 3 points at 1,149.50. Dow Jones Industrial futures fell 25 points to 8,545. The Nasdaq 100 pre-market indicator shed 0.3 percent. The Fed stood pat on interest rates on Tuesday but made it clear that it still hoped the lagging recovery would gain steam now that Iraqi hostilities have ended. The central bank opened the door to future reductions in borrowing cost by saying it was not clear when a robust recovery would come. After Tuesday's close, Internet gear heavyweight Cisco posted its second-best quarterly net profit amid a weak corporate spending environment, but said sales likely would not rise in the current quarter.
Analysts were happy with the third-quarter profit but worried about the overall corporate spending market given Cisco's sales picture. Cisco's stock, which has rallied in the past few sessions, eased to $15.76 before the bell from a $15.90 close. Stocks have climbed since mid-March after first-quarter earnings landed better than expected and the war in Iraq ended in a swift victory for the United States. A string of reports have pointed to a lackluster economic recovery, but investors are hoping for stronger growth later in 2003. On Tuesday, the S&P 500 rose to its highest since early December. In other corporate news, Nextel Partners Inc. , which provides wireless phone service, on Tuesday after the close said it plans to sell $100 million in convertible notes, due in 2008, to institutional buyers. Shares ended at $6. Video game publisher Electronic Arts Inc. , No. 1 in the industry by revenue, on Tuesday after the close posted a smaller fourth-quarter profit due to restructuring charges, but saw strong game sales for franchise hits like "The Sims." The company forecast revenue and earnings for the new fiscal year sharply better than the year prior. Shares closed at $61.74.
On Tuesday, the blue-chip Dow finished at its highest level since Jan. 17, while the tech-laden Nasdaq hit its highest level since mid-June 2002. The Dow Jones industrial average <.DJI> ended up 56.79 points, or 0.67 percent, at 8,588.36. The broader Standard & Poor's 500 Index <.SPX> rose 7.84 points, or 0.85 percent, to 934.39. The Nasdaq Composite Index <.IXIC> gained 19.67 points, or 1.31 percent, at 1,523.71.//