The Nasdaq endured a tumultuous ride last week, as tech stocks proved the
weak link in the market on more than one occasion. Still, tech issues were not
entirely to blame, as the Fed also had a lot to answer for. As expected, the
FOMC held interest rates at 45-year lows; however, the devil is in the detail,
and investors honed in on the Fed's comments and a slight change in wording
regarding future rates that stated it will "be patient" before raising
interest rates. The Fed had previously said that rates would be kept low for a
"considerable period." However, tech stocks also had a hand in the Nasdaq's
downfall. That index leapt to a 31-month high at the start of the week, thanks
in part to a stronger-than-expected quarterly report from Lexmark
International, which in turn bolstered rival and Dow member Hewlett-Packard's
stock. Tech stocks unraveled from this point on. Chip issues suffered a blow,
after Novellus tumbled on a warning that business conditions in the current
quarter could weaken. Texas Instruments also receded, as investors focused on
its gross profit margins and not its higher-than-expected fourth-quarter
earnings. Communications equipment shares were pressured by steep declines
from Foundry Networks and JDS Uniphase. Meanwhile, lackluster first-quarter
guidance sent Veritas Software deep into the red. "There's a rotation out of
areas like technology where we've seen some question marks around some
earnings numbers," said Owen Fitzpatrick, head of the U.S. equity group at
Deutsche Bank Private Wealth Management, to Reuters News. "People are looking
to become more defensive, especially in an environment where potentially
interest rates could rise sooner than anybody expected." Perhaps an upbeat
financial release from Cisco, set to report this week, will coax investors to
let down their guard.
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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