Rate Cut Supercharges LR Index
Shortly after noon, leading gainers in the Index included:
Avanex Corp. (Nasdaq: AVNX), up 3.64 (25.98%) to 14.44;
Digital Lightwave Inc. (Nasdaq: DIGL), up 8.53 (40.67%) to 32.96;
Extreme Networks Inc. (Nasdaq: EXTR), up 5.48 (30.41%) to 23.50;
Finisar Corp. (Nasdaq: FNSR), up 2.85 (27.86%) to 13.08;
Juniper Networks Inc. (Nasdaq: JNPR) up 10.64 (20.92%) to 61.51;
MRV Communications Inc. (Nasdaq: MRVC), up 1.41 (22.31%)to 7.73;
New Focus Inc. (Nasdaq: NUFO), up 4.50 (28.39%) to 20.35;
Newport Corp. (Nasdaq: NEWP), up 9.82 (30.61%) to 41.90;
ONI Systems Inc. (Nasdaq: ONIS), up 6.52 (20.17%) to 38.84;
Vitesse Semiconductor Corp. (Nasdaq: VTSS), up 5.80 (22.67%) to 31.39.
Shortly after 11 a.m., the Fed lowered the federal funds rate (the rate for lending between banks) by 50 basis points to 4.50 percent. The Fed also cut the discount rate for emergency Federal Reserve loans to banks by 50 basis points to 4.0 percent. Most market experts hadn't expected a rate cut before the Fed's next scheduled meeting in May.
A day before the rate cut, there were other encouraging signs in the sector. After the market closed last night, ONI Systems Inc. announced impressive quarterly results and boosted revenue projections (see ONI Beats Numbers, Boosts Guidance). And despite the warning of a massive revenue shortfall and multiple billion dollar inventory write-off by Cisco (see Cisco Projects Revenue Dip), shares of Cisco did not fall sharply after the news was released, indicating that the market has perhaps already accounted for much of the bad news.
The rate cut is important to the optical sector because lower rates spur investment and lower the cost of borrowing. Many optical stocks have suffered because of lower spending rates by telecommunications carriers and the inability of startup carriers and equipment providers to raise new financing.
-- R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com