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Market Rally Flattens Out; Cisco & Palo Alto Beat, Sell Off

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Markets flattened out today by the closing bell, save the blue-chip Dow, which upturned slightly and closed +163 points, or +0.47%. The Nasdaq lagged the other major indices for the session, even dipping negative for a short time but ultimately finishing +0.07%. The S&P 500 and the small-cap Russell 2000 split the difference, both +0.16% on the day. Yesterday was a hard act to follow; plenty of exuberance over peak interest rate levels has given away to something else today.

Ahead of regular trading, PPI numbers for October were surprisingly low, finally obtaining a “2-handle” on year-over-year core to +2.9%, while Retail Sales for last month were slightly negative and Empire State for this month surprisingly stronger than expected. These are good “soft landing” numbers for the economy, in addition to coming close to claiming victory over inflation (though the Fed will likely not be voicing this anytime soon). But as far as driving markets further up? That appetite seems to have gotten quenched.

Why would this be? Consider that, off late-October lows, the Nasdaq is up another +10.7%, the Russell is +9.4%, the S&P +8.8% and the Dow +7.5%. Surely these levels were oversold a couple weeks ago, but the question becomes whether or not this news can sustain a further bullish push into the new year. There’s still a 2024 recession to consider, after all.

Cisco Systems (CSCO - Free Report) shares are down -9% following its earnings and revenue beats for fiscal Q1 after today’s close. Earnings of $1.11 per share outperformed the Zacks consensus by 8 cents — though Cisco never misses on its bottom line — on $14.7 billion in quarterly sales which surpassed the $14.61 billion expected, +8% year over year. But next-quarter revenue guidance was taken way down: to a range of $12.6-12.8 billion; the Zacks consensus had been for $14.15 billion. Consider these good quarterly Q1 figures as having pulled forward some of the enterprise network giant’s sales.

Palo Alto Networks (PANW - Free Report) also fell -9% in after-hours trading following its fiscal Q1 report this afternoon, even as it beat bottom-line expectations — earnings of $1.38 per share easily took out the $1.16 analysts were looking for, and a very healthy +66% growth year over year — as well as top-line — $1.90 billion versus $1.84 billion anticipated — and raised guidance for both earnings and revenues. But these were not exactly blowout surprises, which investors come to expect from a company trading +85% year to date.

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