TECH shares fell yesterday after Dell’s disappointing sales outlook fanned worries weak economic growth will hurt earnings in the third quarter.
The Dow and S&P indices ended little changed in an up-and-down session where investors sold growth sectors in favor of defensive shares like telecoms and utilities.
Computer maker Dell was the S&P’s worst performer, losing 10 per cent to $14.20 after cautious comments on spending on technology by the government sector.
Hewlett-Packard was also hit, falling 3.7 per cent to $31.39 and weighing on the Dow as investors also worried business spending could decline in coming quarters.
“You don’t usually see tech down so sharply while the rest of the market is down less, which shows that the latest earnings have created a lot of concerns,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.
In after-hours action by tech companies, NetApp slumped 14.5 per cent to $35.60 after its revenue missed expectations while JDS Uniphase lost 3.2 per cent to $11.32 following a weak first-quarter outlook.
Retailers slipped following a weak report from Abercrombie & Fitch, despite good news from Target. With 94 per cent of S&P companies reporting earnings, 72 per cent have beaten expectations.
The Dow Jones industrial average was up 4.28 points, or 0.04 per cent, at 11,410.21. The Standard & Poor’s 500 Index was up 1.12 points, or 0.09 per cent, at 1,193.88. The Nasdaq Composite Index was down 11.97 points, or 0.47 per cent, at 2,511.48.
Concerns that the US economy may be headed for another recession and that Europe may be unable to stem its financial troubles have hit the market, with a strong earnings season one of the few bright spots for traders, though they often have not been enough to offset macroeconomic woes.
“So with technology concerns, and then more than our fair share of recession concerns and continued concerns about Europe, we’re in a real ‘three strikes, you’re out’ situation today with no reason to buy,” Colas said.
Both Abercrombie & Fitch and Deere & Co slumped on disappointing margins news. Abercrombie also raised concerns about the consumer response to higher prices going into the crucial back-to-school shopping season.