Has there been a false dawn on Wall Street? Fears that the US economic slowdown is about to wreak havoc with corporate profits once again sent share prices tumbling across the board yesterday.
Tech stocks took a steep dive after Sun Microsystems warned a global technology spending slowdown had intensified in Europe and Asia-Pacific. The tech-heavy Nasdaq has lost 10 per cent since its peak last week, when it had recovered 40 per cent from an April low. Yesterday it slipped more than 4 per cent to close at 2,084.5, down 91.09. The Dow Jones fell 166.50, to close at 10,872.64.
Merrill Lynch also warned that business in tech firms may be getting worse across the globe, while stabilising in the US. This follows a warning from Morgan Stanley Dean Witter that the recovery in information technology could be later than Wall Street expects and might be delayed until the third quarter of next year.
In a review of telecom equipment and network companies, the bank lowered its view of several tech stocks, including JDS Uniphase and Juniper Networks - which fell 8 per cent by midday. Sycamore Networks fell 12 per cent and Nortel Networks 4 per cent.
Shares in Sun Microsystems fell 12 per cent in morning trading after the computer and software giant warned late on Tuesday that its fourth-quarter results would be worse than expected. But Sun's chief financial officer, Mr Michael Lehman, said that despite the global environment, the domestic business climate was more stable, though still weak.
French telecom gear maker Alcatel lost 7 per cent, after slashing its earnings outlooks amid signs that the slowing economy would affect profits again after a miserable first quarter. Tech shares were also hit by news that Lucent Technologies, which posted $4.7 billion (#5.5 billion) in losses in the first half of its fiscal year, had ended merger talks with Alcatel, though Lucent's share price improved slightly.
