 January dot-com shutdowns matched those in November
USA Today
Forget about the January rally. Last year’s tech-led bear market is not only back, but uglier than ever.
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| Trading was frantic at the Chicago Board Options Exchange. Increased wholesale inflation and bad news from tech companies sent the Dow Jones industrial average, the Nasdaq composite index and the S&P 500 index down.
Associated Press |
The Nasdaq plunged a second straight session yesterday as concerns mounted that the technology sector’s problems are deeper than just excess inventories that can be worked off by July.
The Nasdaq plunged 107 points to 2319. That’s a staggering 16.4 percent decline this month alone, wiping out all of January’s gains and leaving the index down 6.2 percent this year.
"I don’t think the bear market ever went away," said Richard Bernstein, chief quantitative strategist at Merrill Lynch.
Intel helped fuel the selloff with its sweeping cost-cutting plan to trim certain spending by 30 percent and reduce its work force through attrition. Shares fell $2.94 to $31.44. Other big-cap techs shared the pain as Amazon, Cisco, Sun and JDS Uniphase all hit 52-week lows.
Analysts see Intel as more proof that the unwinding of the tech boom won’t be pretty. "We have to conclude we are in the midst of a recession," said Andy Engel at Leuthold Group.
Already-reduced tech earnings expectations may still be too rosy. Forecasts are calling for zero earnings growth this year, said Ed Keon, quantitative strategist at Prudential Securities. But he said he expects final results will show a drop of 10 percent.
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| Intel CEO Craig Barrett yesterday detailed stringent spending cuts, sending shares into a 7.23 percent plunge.
Bloomberg News Service |
And if a worsening outlook pulls tech stocks down more, that could mean trouble for the broad market, too. "This can get even worse," said Jim Paulsen, chief investment officer at Wells Capital Management.
There are serious concerns weighing on technology’s future.
 There aren’t any revolutionary new tech products to pull the sector out of its doldrums, Paulsen said. Lacking breakthrough products, the tech sector can’t sustain a rally even with the reduction of interest rates this year, he said.
The tech crash’s design makes it more serious the longer it lasts. Small and mid-sized companies face serious cash shortages as the stock market remains closed to new offerings. "Every month that drags on, another company burns out," Paulsen said.
But such burnouts spread like wildfire because small companies have been top customers of even the giants like Cisco Systems, Dell, Microsoft and Nortel, he said.
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