NEW YORK, Aug 11 (AFP) - Wall Street took a beating Wednesday after Cisco Systems chief executive John Chambers spread fear over the US economic outlook, but a slide in oil prices staunched the wounds.
Investors were shaken by Chambers' cautious economic assessment in an address late Tuesday. His comments dispelled optimism generated hours earlier by Federal Reserve policymakers.
By early afternoon, the Dow Jones industrials average of 30 top stocks was down 55.01 points, or 0.55 percent, at 9,889.66.
The broader Standard and Poor's 500 index slipped 8.33 points, or 0.77 percent, to 1,070.71.
The Nasdaq market index, loaded with technology stocks, slumped 38.33 points, or 2.15 percent, to 1,769.87.
Speaking to investors after the market close Tuesday, Cisco's Chambers said customers were cautious about the economy.
The verdict was a shock, coming just hours after Federal Reserve chairman Alan Greenspan and fellow policymakers had raised interest rates by a quarter point and expressed faith in an economic rebound.
"In a span of two hours you had Alan Greenspan coming out and saying that some of the issues plaguing the economy are transitory and short-lived and the economy is in good shape, and then John Chambers came out and said that his customers are still cautious," said Jefferies and Co. market analyst Arthur Hogan.
"So you have diverging views of the US economy," Hogan said.
"Today we have been listening to John Chambers, yesterday we listened to Alan Greenspan," he said.
A slump in oil prices eased downward pressure on stocks, however.
Saudi Arabian Oil Minister Ali al-Nuaimi said his country was ready to increase oil output by 1.3 million barrels per day (bpd) "immediately" to cope with world demand and curb soaring prices.
Oil prices slumped after the announcement but then began retracing their steps.
By early afternoon, New York's main contract, light sweet crude for delivery in September, was down just 15 cents at 44.37 dollars.
"The market is celebrating the fact that the price of oil was sliding," Hogan said.
Cisco shares plunged 2.05 dollars, or 10.02 percent, to 18.41 dollars on the Nasdaq.
The computer networking giant reported a 40.5-percent jump in net profit to 1.38 billion dollars in the quarter ending July 31 compared to last year, and a 25.5-percent leap in sales.
It predicted a two percent gain in sales in the current quarter.
First Albany Corp. analyst Hugh Johnson said the Cisco earnings result were good.
"But (chief executive) John Chambers is highly regarded and he said clients were cautious on the economy," Johnson said.
"Hence the decline in Nasdaq."