This article was last updated on April 16, 2022
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Cisco trades today almost exactly in the middle between its 52-week high and 52-week low. It’s struggled to break through its 200-day moving average this month. Intel is another technology stock stuck almost perfectly in the middle between its one-year trading range. That’s even after executives said three weeks ago following the chipmakers earnings that every geography was posting better than expected growth.
The earnings report may move Cisco temporarily, but not for long," said Pete Najarian, co-founder of TradeMonster.com and a ‘Fast Money’ trader. "Just look at Intel. No matter what the CEOs say there are still going to be questions about maintaining growth and margins in this economic stagnation."
It’s a purgatory that the whole market finds itself trapped. Despite more than three-fourths of the S&P 500 beating earnings estimates in the past month, an easing of the Euro crisis and many aggressive valuation calls from investors, the benchmark finds itself still unchanged for the year. Cisco is up just 2% in 2010.
Valuation appears very compelling, with Cisco’s multiple relative to the S&P 500 firmly in the lowest decile of its 5-year history,” wrote Jayson Noland, a Baird analyst. “Historically, buying at these valuation levels has yielded strong outperformance versus the market."
But this is not an economic environment we’ve seen in the last five years. The Federal Reserve may signal tomorrow that it is ready to begin buying assets like Treasuries to fight deflation, once again, some economists predict. The central bank could also issue a downgrade of the economy, raising fears of a double-dip scenario. How could John Chambers soothe jittery, safety-seeking investors a day after that?
Cisco, Intel and other tech will surely earn money, but I am not sure they are the growth story," said Brian Kelly, founder of Kanundrum Capital. “And the market does not seem to care anyway."
Despite Intel being unchanged for the year, Kelly owns the stock for its dividend income and the chance that the technology sector does eventually get some investor interest. That’s something that can’t be said for Cisco, which doesn’t pay a dividend.
For the best market insight, catch ‘Fast Money’ each night at 5pm ET and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.
John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team
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