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Tech stumbled Thursday, while the rest of stock universe was able to keep losses manageable. The Dow Jones Industrial Average slipped 33.7 points (-0.25%), Standard & Poor's 500 index lost 0.85 points (-0.06%), and the Nasdaq underperformed, falling 52.76 points (-1.92%). Volume spiked to 2.19 billion on the NYSE, and decliners just beat advancers by a ratio of about 17:16.

The weakness in tech stemmed from a disappointing outlook from Cisco (-9.1%) in its quarterly report Wednesday night (full story). The networking giant guided a 16% revenue increase in the current quarter, below estimates, and had a cautious outlook on business spending. The dim forecast grabbed attention away from a solid third quarter, where Cisco beat expectations. Other tech names like Google (-7.4%), Amazon (-6.0%), RIMM (9.4%), and Apple (-7.4%) fell hard on perceived future tech weakness.

Fed Chairman Bernanke spoke in front of Congress Thursday, remarking that the U.S. economy had been resilient despite all the turmoil in the housing and credit markets (full story). However, Bernanke does not see the economy sustaining its current rate of growth, and said the current problems will take their toll. He also said sharp increases in energy prices would increase inflation worries and impose more moderation on the economy.

The basic materials (+1.62%) sector continued its positive momentum, while tech (-2.40%) was a drag on the broad markets. Financials (+0.27%) managed to end higher, after being down more than 2% at one point. Energies (+2.27%) were strong, despite crude losing $0.91 to fall to $95.46/barrel in a volatile session. Insurance company AIG (-5.4%) slipped because of a 27% decrease in profits and failure to meet targets (full story). Ford (+2.9%) beat expectations and gave an upbeat update on its restructuring plan (full story). Gap (5.1%) announced strong guidance for the third quarter. Rio Tinto (+23%) rallied on news that BHP Billiton (-4.3%) put in a bid for it, but the $109 billion purchase price was too low (full story). Morgan Stanley (+4.9%) announced a writedown resulting from the subprime crisis that will lower current quarter profits by $2.5 billion (full story).

On Friday, International Trade (8:30 AM), Imports and Exports (8:30 AM), and Consumer Sentiment (10:00 AM) will be released. While Thursday may have been the beginning of an up move, it was more likely no more than some short-term short covering. Until we get more of a clear picture from the Fed, housing, and the subprime crisis, expect more volatile sessions like this one to end the year.

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Source: Thursday Wrap – Dow -0.25%, S&P -0.06%, Nas -1.92%