NEW YORK >> Even with the dot-com disasters of recent years, Wall Street keeps hoping that the high-tech sector will lead stocks back to health. And for a while, as the market rallied after New Year's, tech did indeed outperform other sectors.
Technology needs more
customer dollars to get
Wall Streets support
By Amy Baldwin
This past week, that began to look like a false start, as tech companies including Intel and Microsoft released positive earnings reports but were cautious in their outlooks.
"People were hoping that the tech industry would come back and hit home runs again and it is just not happening," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif.
With some of the most high-profile tech companies reporting quarterly earnings this past week, investors were hoping for signs of new life in the sector. Instead, the news was mixed at best. Microsoft and IBM both beat analysts' earnings estimates but their outlooks for the year fell short of expectations. Intel surpassed Wall Street's forecasts but the chip maker also said it was reducing capital spending this year by roughly $1 billion.
Tech shares took the news hard, with the Nasdaq composite index falling nearly 5 percent. The drop wiped out the Nasdaq's 4.4 percent gain of the previous week, when tech stocks scored the biggest advance in the market's pre-earnings season rally.
What's particularly upsetting to investors about the latest tech news is that it came from industry bellwethers. If these companies can't deliver what the market wants to hear, then clearly the entire sector has a long way to go to becomes the powerhouse that sends Wall Street surging again.
Industry analysts say the biggest hurdles technology firms face are a dearth of essential products and sluggish spending by other companies on information technology.
For the week, the Dow Jones industrial average fell 198.15, or 2.3 percent. It closed yesterday at 8,586.74. The Nasdaq had a weekly loss of 71.53, or 4.9 percent, ending at 1,376.19 yesterday. The Standard & Poor's 500 index had a weekly decline of 25.79, or 2.8 percent, finishing at 901.78 yesterday. For the week, the Russell 2000 index, the barometer of smaller company stocks, fell 8.34, or 2.1 percent. It ended yesterday at 388.10.
The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 8,530.32, down 228.11 from last week. A year ago, the index was at 10,509.36.