Nortel falls in the wake of Cisco Systems downgrade

Tech bellwether Cisco is down more than 8% this morning after a Lehman Bros. analyst cut his target on the stock from the US$90 range to US$65, killing any foward momentum in optical and networking stocks such as Nortel Networks and JDS Uniphase.

As a result, the TSE 300 is down 125 points to 9,196. Volume is decent at 66.4 million shares, about evenly split between buyers and sellers. Losers are outnumbering the winners about five to four, though.

The story today is again technology. The techs are down almost 7%, pulling down the industrials 5%. Consumer stocks are weak, too, thanks to weaknesses in software and biotechnology. Oils and real estate are also down.

There’s plenty of strength in old economy sectors. Financials are up 1.5%, along with increases in conglomerates, mines, paper, pipelines and utilities.

But this show of old economy strength is nothing in the face of Nortel, off another 7% on heavy volume of 9.3 million shares. The downdraft from Cisco has also caught such names as JDS Unipahes, Research in Motion, Pivotal, Sierra Wireless, Certicom and Descartes Systems in its wake.

Against this weakness, BCE continues to rally. It is up another 3.4% today, muscling the utilities higher. The TSE is also receiving support from the banks. Athough TD Bank has the heaviest trading volume, BMO, Royal and Scotia are showing the biggest increase, each adding 2% to 3% in active trading.

Moore Corp. is active today, down more than 9% on 2.2 million shares, after it announced that it lost 9¢ a share in the last quarter, down from a 10¢ a share profit in the period last year. Revenues also slipped from last year.

Abitibi has the paper stocks rallying, up 1.25% on 2 million shares after it beat estimates, reporting earnings of 24¢ a share, up from 19¢ a share in the period last year. Bowater and Weyerhaeuser are up, too.

There’s also strength in Bombardier, Harris Steel, Magna, MDSI, and PRI Automation.

In other news, Ballard Power Systems is paying Millennium Cell US$2.4 million for licences in a hydrogen generation system the firm is developing for use in Ballard’s fuel cells for cars and buses. Ballard also has the right to purchase up to 400,000 Millennium Cell shares.

In New York, trading volume is moderate with Cisco taking the Nasdaq composite down, while the Dow rallies. At midday, the Dow Jones industrial average is up 129 points to 10,719. Nasdaq has dropped 124 points to sit at 3,154. The S&P 500 is flat at 1,380. Cisco, Nortel, JDS, SDL and Juniper are all leading tech issues lower. The Dow is up on this morning’s favourable GDP numbers, a stronger euro, and news that OPEC will increase production again tomorrow.

The CDNX is following the tech stocks down. It has lost another seven points today to sit at 3,252 on average volume of 17.4 million shares. Mines are the weakest group, followed closely by techs and oils. Calcitech Ltd is the top trader up 8% to 27¢ on 970,000 shares.