Rate-cut doubts sink Wall Street

By Jennifer Coogan

The Nasdaq's woes worsened after the bell, with network equipment maker Cisco Systems dropping more than 7 percent after the tech bellwether forecast disappointing third-quarter revenue growth, citing economic concerns. Cisco's chief executive John Chambers also said CEOs in the United States and Europe are as cautious as he had seen in many years.

"Cisco helps further the notion that the economy is weak at the very best. It's worrisome and the market is not going to like it," said Chip Hanlon, president Delta Global Advisors, Inc. in Huntington Beach, California.

Adding to the pessimism, Macy's Inc released dismal sales figures, stoking anxiety about Thursday's wave of sales results due from an array of retailers.

The two media conglomerates fed some optimism that corporate profits outside the financial sector were holding up.

The comments from the Fed officials undermined speculation that the Fed would need to make another emergency rate cut following reports on job creation and service-sector growth that suggested the economy was slipping into recession.

The Nasdaq is now down 20.3 percent from its October peak, signaling that a bull market run that had begun in October 2002 is officially over.

In the regular session, shares of CME Group Inc and NYMEX Holdings Inc both tumbled 17.6 percent as investors feared a Department of Justice call for a shake-up in financial-futures exchanges may thwart a proposed merger of the two exchange operators.

Macy's shares were down 4.6 percent at $23.94 after the department store chain said sales at stores open at least one year fell 7.1 percent last month.

Shares of Disney jumped 4.8 percent to $31.50 on earnings that topped Wall Street estimates, while Time Warner shares rose 2 percent to $15.71 after it said it expects profit growth to match or beat Wall Street expectations.