Dell warning chills Wall Street

No. 1 PC maker warns that lower prices will lead to sales, profit miss; GM restates results to post 1Q profit, Disney, Cisco earnings on tap.

May 9, 2006: 6:27 AM EDT


NEW YORK (CNNMoney.com) - Earnings news will be on investors' mind Tuesday, as a warning from Dell was balanced by GM restating first quarter results to achieve its first profit in more than a year.

Investors will also be looking forward to after-market earnings from computer networking company Cisco Systems, which is expected to report improved results, and media conglomerate Walt Disney, where earnings are forecast to decline. Chipmaker Texas Instruments will also be giving guidance as a two-day analyst meeting kicks off Tuesday.

U.S. stock futures were mixed early trading, with the blue chip S&P 500 futures slightly higher as shares of GM (Research) were higher in Frankfurt trading, and the tech-heavy Nasdaq futures slightly lower on the warning from Dell (Research). The world's No .1 personal computer maker, which is due to report results May 18, said lower prices for its product would cause both earnings and revenue below its earlier guidance. Shares of Dell lost nearly 6 percent in after-hours trading.

GM revised its first-quarter results in a Securities and Exchange Commission filing Monday to exclude a charge for a retiree health care deal with its union, citing discussions it had with SEC on how to best account for costs associated with the program. The company's core North American auto units still lost money in the period, though. Still shares of GM gained 1 percent in Frankfurt trading.

GM investors will also be looking at the bankruptcy court in New York Tuesday, where former GM parts unit Delphi, still its largest supplier, and its unions will argue whether the world's No. 1 auto parts maker should be able to dump its labor pacts. The unions' leadership has vowed a strike if the contract are voided, a step that would shut production at GM and could lead the automaker to follow Delphi into bankruptcy.

Stocks were essentially flat in trading Monday, but Dow is still within striking distance of a record high.

Investors and analysts are looking for a rebound in corporate spending and a big acquisition should translate into a strong third quarter for Cisco (Research), while Disney investors will be looking to see if rising gas prices are hurting attendance at the company's amusement parks. Cisco shares were slightly lower in Frankfurt, while Disney shares gained.

Oil prices were little changed, remaining just below the $70 a barrel mark where it closed Monday.

The June light crude futures contract for NYMEX was down 6 cents to $69.71 in electronic trading, while the June contract for Brent crude gained 8 cents to $70.29.

Major markets in Asia closed mostly lower Tuesday following the Dell warning. Sony (Research) announced it will price its PlayStation 3 at as much as $599 when it launches in the United States on Nov. 17, the highest price of any major console launch. Shares of Sony lost nearly 1 percent in trading in Tokyo.

Major European markets were up slightly in early trading.

Treasury prices were lower ahead of Wednesday's meeting of the Federal Reserve, lifting the yield on the benchmark 10-year note to 5.12 percent from the 5.11 percent level reached late Monday. While the Fed is widely expected to announce its 16th straight quarter-percentage point rate hike, investors will be looking for clues in the central bank's statement about whether it is done with its policy of tightening. The dollar was higher against the euro, while it was little changed from Monday's close, although it's up from the eight-month low hit Monday.