Tech stock sell-off weighs on Wall St

TECHNOLOGY stocks sold off yesterday, with the Nasdaq teetering on a key technical support level as uncertainty over higher oil prices looks set to drive volatility in the days ahead.

The Nasdaq composite index dropped 1.4 per cent and closed just above its 50-day moving average, a widely followed technical level that if breached could signal more declines in the sector that has helped lead the market rally.

Also weighing on Nasdaq, communications equipment maker Ciena Corp forecast weaker-than-expected sales, sending its shares sliding 9.2 per cent to $25.98.

Investors “are jumping on an opportune seasonal slowdown that typically happens between March and July for tech”, said Marc Pado, US market strategist at Cantor Fitzgerald & Co. “It has been one of the leadership groups since August.”

Brent crude has been on investors’ radar as analysts and economists gauge how it might hurt economic demand if prices continue to rise. Crude edged lower yesterday after hitting its highest since September 2008 on the conflict in the Middle East. Brent crude dipped 0.8 per cent to $115.20 a barrel.

The Dow Jones industrial average dropped 79.85 points, or 0.66 per cent, to 12,090.03. The Standard & Poor’s 500 Index fell 11.02 points, or 0.83 per cent, to 1,310.13. The Nasdaq Composite Index lost 39.04 points, or 1.40 per cent, to 2,745.63.

Wells Fargo said downgrading the semiconductor sector to “market weight” from “overweight” was “an indication of a moderate though still optimistic view”.

Tech has been a favourite of analysts, along with other cyclical sectors. Western Digital jumped 15.6 percent to $34.68 after the world’s second-biggest computer hard drive maker agreed to buy Hitachi’s hard disk drive operations for about $4.3bn.

Also, TomoTherapy shot up 24.5 percent to $4.57 after Accuray Inc said it will acquire the smaller rival in the radiation oncology field.

The CBOE volatility index rose 8.2 per cent to 20.63. Joe Kinahan, chief derivatives strategist at TD Ameritrade said investors were insuring against a possible fall below 1,300 for the S&P.

“If we break this level the S&P could continue all the way down to 1,275. So many investors are trying to get ahead of this by paying up for portfolio protection in the form of index and equity options,” said Kinahan.

Volume was about 7.92bn shares on the Nasdaq, NYSE and AMEX, below the daily average of 8.47bn for last year.