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Nasdaq slides, S&P slips as tech worries rise

Nasdaq slides, S&P slips as tech worries rise
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First Published: Thu, Oct 07 2010. 09 12 AM IST
Updated: Thu, Oct 07 2010. 09 12 AM IST
New York: Tech shares slumped on Wednesday, hit by worries about demand for semiconductors and data storage.
The Nasdaq bore the brunt of the day’s selling, led by data system services provider Citrix Systems. The stock was down in sympathy with small-cap Equinix Inc, which plunged 33.1% to $70.34 after it issued a revenue warning late Tuesday. Citrix slid 14.1% to $60.15.
“You are starting to see a natural rotation and some profit taking in the cloud computing sector that has been red hot in the last few months,” said TD Ameritrade chief options strategist Joe Kinahan in Chicago.
“So those investors that currently own Citrix are reconsidering the valuation at these levels.”
Another blow to tech came from Morgan Stanley’s downgrade of semiconductor companies Xilinx Inc and Altera Corp to “underweight” on concerns about a slowdown in Asian markets. Both fell more than 2%.
The broader market, meanwhile, was hamstrung by a poor reading on private-sector employment and speculation about further quantitative easing from the Federal Reserve. A report showed 39,000 private jobs were eliminated in September, while economists were expecting jobs to be added in the month.
The ADP Employer Services report said private payrolls fell by 39,000 in September, underscoring concerns about the weak labor market. But at the same time, it was a positive factor for market players anticipating more efforts from the central bank to boost the economy.
The Dow Jones industrial average added 22.93 points, or 0.21%, to 10,967.65. The Standard & Poor’s 500 Index inched down 0.78 of a point, or 0.07%, to 1,159.97. The Nasdaq Composite Index dropped 19.17 points, or 0.80%, to 2,380.66.
The IMF released a report that said a double dip recession in developed countries was unlikely and projected global growth would expand 4.8% in 2010 and slow even further to 4.2% in 2011. It expects developed countries to have a combined growth rate of 2.7% this year and emerging markets to advance 7.1% in the year.
Xilinx lost 2.4% to $25.71 and Altera fell 2.3% to $29.30. The PHLX Semiconductor Index, known as the SOX, dropped 1.6%, its biggest slide in a month. The index has eased since the start of the month after surging more than 13% in September.
Equinix was among the 10 most heavily traded companies on the Nasdaq, putting it among much larger companies such as Intel Corp and Cisco Systems. Equinix was also the Nasdaq’s biggest%age loser. More than 30 million shares changed hands, while the stock’s 50-day average volume is 738,489.
The ADP report came ahead of Friday’s larger employment report from the government. Non-farm payrolls are forecast to come in unchanged on Friday, according to Reuters data, though private payrolls are expected to add 75,000.
“I think it’s a ‘win-win´ for the market on Friday,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.
“If the report comes in weaker than expected, it will prompt the thinking that the Federal Reserve will begin quantitative easing sooner than later and be more aggressive. If the report comes in stronger than expected, it means the economy might be doing a little better.”
On the earnings front, Yum Brands Inc gained 1.2% to $47.36 after reporting adjusted third-quarter earnings that beat expectations by a penny.
Alcoa will mark the unofficial start to earnings season on Thursday. Alcoa shot up 1.8% to $12.37.
Asian markets ended higher; the Shanghai Composite remains closed for the week on account of a national holiday. European indices also ended higher.
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First Published: Thu, Oct 07 2010. 09 12 AM IST
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