Technology stocks plunged again in the US yesterday, leaving the Nasdaq Composite index down 25 per cent from its peak.
The market suffered its second-largest points decline ever, and its sixth largest percentage fall, after analysts reduced their estimates of earnings for Microsoft. The Nasdaq composite index finished down 286.27 at 3769.63.
Concerns that technology stocks may have risen too far have helped push the market into the depths in the last few days, and traders said that it was still seeking a bottom. The Nasdaq is now down 7.4 percent for the year as a whole.
The decline hit the Dow Jones industrial index as well, and it ended the day down 162 points to 11,125. It had been trading up earlier in the day, but its technological components - Hewlett-Packard, Intel, IBM and Microsoft - dragged it down as the day went on.
The impetus for yesterday's fall came when Goldman Sachs' analyst Rick Sherlund cut his revenue estimates for Microsoft's third-quarter to $5.75bn from $5.95bn, citing slow demand for personal computers. Mr Sherlund has followed the stock since Goldmans arranged Microsoft's initial public offering in 1986.
Cisco Systems, the maker of switches and other devices behind the internet backbone, led the resultant tech sell-off with a 7 per cent fall to $65. Other hi-tech fallers included Sun Microsystems and Intel.
Goldman Sachs kept Microsoft on its "recommended list", and did not change the outlook for earnings per share. None the less, the market's thin confidence is easily bruised at the moment.
"Folks are saying: 'Wait a minute - if Microsoft isn't going to be able to exceed expectations, we'll stay on the sidelines and refrain from buying technology stocks'", said Michael Manns at American Express Financial Advisors.
Microsoft stock ended down $4.50 to $793??8. The company's shares have now fallen by 23 per cent since US Judge Thomas Penfield Jackson ruled that it had broken US anti-trust laws.
The benchmark 30-year US Treasury bond slid by just over one point, and its yield rose to 5.85 per cent.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies