Tech Stocks Slide on Waning Domestic Demand

Brittney Barrett  |

There was little news to act on during trading on Tuesday. Only a single government report was released for the day, indicating unanticipated improvement in the U.S. services sector in August from the month prior. The Institute for Supply Management’s services index climbed from 52.7 in July to 53.3 in August. The domestic improvements were eclipsed though by ongoing worries regarding European debt contagion and continued currency weakness.

The current condition is leading some analysts to speculate the possibility of a collapse within the next year-and-a-half. This would devastate not only the EU but the U.S., which has considerable vested interest in the banks.

Naturally, this sent a shiver down through the larger market with all but two compartments ending in the red. Among the more notable victims of the day were technology stocks which were broadly lower as analysts warned the PC and software markets could soften on the basis of a European recession.

This led shares of Hewlett-Packard Co. (HPQ) lower for the day. HP shares were shed aggressively over the course of trading as the news compounded already bearish sentiment on the stock.

The same could be said of Dell Inc. (DELL), which stands to benefit from expanding tech demand in China, but remains challenged  feeble performances in Europe and the U.S. PC shipments. Shares of Dell were near flat by the end of the day after losing in morning trading.

China is repeatedly cited as a potential boon for PCs, which have lost sales as Apple products have risen to dominance and the overall economy has faltered. More evidence is arising; however that sales in China and Latin America may not be strong enough to negate the extreme weakness stateside and in Europe.  J.P. Morgan analysts also asserted that the anxiety surrounding economies in Europe and domestically would weigh on the corporate technology market, a major source of revenues for PC makers. International Business Machines (IBM) as well as other companies afflicted by the assertions sunk on the news.

Corporations that supply parts for PC’s, semiconductors for instance also fell. Intel (INTC) shed less than a percent as did Texas Instruments (TXN) and Advanced Micro Devices (AMD). Shares of SanDisk (SNDK) bucked this trend by adding close to 2 percent on speculation that the company is a potential target for acquisition.

Software companies like Oracle Inc.(ORCL) and Microsoft (MSFT) did not have the benefit of such distractions. Their vulnerability to lessening corporate technology spending is significant and investors abandoned shares with the recognition of this. Microsoft has stressed that it is no longer looking at sales of Windows programs as its primary income source.

Apple (AAPL) was among the few bright spots within the sector. Apple tends to be looked at as a safety stock as its new product debuts and range of revenue sources generally defy the greater tech market. Apple is often able to buck trends and was less affected by the announcement regarding China sales. Apple has been having a staggering performance overseas as denizens respond well to the strength of the brand.

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