Blue Chips Rise, but Cisco’s Drop Weighs on Tech

Blue-chip stocks edged up Wednesday as a successful Treasury debt sale pushed bond yields down, cheering stock investors worried about higher interest rates.

But technology stocks finished lower for the fourth session after industry bellwether Cisco Systems’ earnings failed to top Wall Street expectations.

The Dow Jones industrial average gained 25.42 points, or 0.3%, to 9,061.74, after trading in negative territory for most of the morning. The Standard & Poor’s 500 index rose 1.62 points, or 0.2%, to 967.08.

The technology-laden Nasdaq composite index, however, fell 20.82 points, or 1.2%, to end at 1,652.68, bringing its four-day loss to almost 5%.

Winners led losers by 7 to 6 on the New York Stock Exchange while losers held a 5-3 edge on Nasdaq. Trading was moderate.

Investors bid briskly for $18 billion of five-year Treasury notes auctioned Wednesday afternoon, and the notes sold at a yield of 3.3%. On Tuesday, a disappointing sale of three-year notes had driven bond yields up sharply, but they retreated across the board Wednesday.

The benchmark 10-year T-note slid to 4.27% from 4.39% on Tuesday.

But the recent surge in interest rates continues to trouble Wall Street, analysts said.

“In the last several weeks, we’ve seen a substantial rise in bond yields,” said John Caldwell, chief equity strategist at McDonald Financial Corp. “And when there’s shocks like that, you have to ask if that could start to choke off economic activity.”

Strength in housing and financial shares helped lift the blue-chip Dow and S&P; 500.

Housing-related stocks shot up after a report saying Americans applied for home mortgages in near-record numbers last week, rushing to take advantage of mortgage rates that are still low but have surged in the last few weeks. Financial stocks got a boost after a series of bullish brokerage comments on leading industry players.

But Cisco Systems shares fell sharply a day after it delivered earnings that met, but failed to beat, Wall Street forecasts. Shares of Cisco, the world’s largest maker of equipment that directs Internet traffic, fell $1.21, or 6.4%, to $17.65.

Cisco’s drop weighed on other tech stocks, pulling the S&P; index of communications equipment stocks down 3.8%, making it one of the S&P;’s biggest percentage-losing sectors.

In other highlights:

* Toll Bros., the largest builder of luxury houses, added $1.76 to $28.23 after it said home building revenue rose 20% in the last three months. Centex, No. 2 builder overall, rose $2.96 to $74.86. The S&P; index of homebuilding stocks had its biggest gain in almost two months, rising 3.9%.

* Home Depot added 96 cents to $31.32 and at 3.2%, was the biggest percentage gainer in the Dow. Shares of the home-improvement chain will “outperform even if rates continue to climb” because internal improvements will drive growth, according to a UBS analyst.

* Financial stocks got a boost after Merrill Lynch upgraded its rating on rival Lehman Bros. and Smith Barney raised profit forecasts for Lehman and Morgan Stanley. Lehman gained $1.85 to $62.65, Morgan Stanley added $1.29 to $47.09, and financial company and Dow component American Express rose $1.10 to $43.55.

* Zimmer Holdings advanced $3.13 to $50.43. The company is set to buy Centerpulse of Switzerland after a competitor decided not to raise its $2.5-billion bid. The move will make Zimmer the world’s biggest manufacturer of human joint implants, surpassing Johnson & Johnson and Stryker Corp.

* CheckFree, whose software lets users pay bills on the Net, slumped $5.31, or 20%, to $20.98. The company said earnings for the quarter ending in September would fall short of estimates.