Tech Stocks Stumble: Panic or Predictable?

The global demand for technology is likely to stabilize plunging stock shares, but when? 

Was it panic or predictable? Or is the continuing unpredictability of the U.S. economy creating panic in the market, especially in the technology sector? Those were the questions roiling the market Jan. 22 after tech bellwether stocks stumbled coming out of the gate but began stabilizing later in the day.

"Frenzy feeds off itself," Eric Openshaw, vice president and national sector leader for technology at Deloite Touche USA, told eWEEK. "I think we're seeing a lot of U.S. investors reacting to U.S. market trends."

While the U.S. economy has slowed in recent months due to what Openshaw calls the "subprime debacle," the tech sector has maintained the collapse of the mortgage and housing markets would have little or no effect on tech stocks.

But the Jan. 21 global market sell-off when the U.S. market was closed on a national holiday prompted U.S. investors to dump tech shares Jan. 22, even after an emergency interest rate cut by the Federal Reserve Board.

"Vis-??í-vis the global market, there will be aberrant swings - either way -- in the U.S. market," Openshaw said. "These are short-term trends."

The trend Jan. 22 was to sell. In mid-morning trading, Google was down more than $20 per share in a 3.3 percent slide to $579.44 a share. By mid-afternoon, Google rallied to $588.14 a share. Microsoft fell almost 3 percent to $32 a share after the opening bell but nominally rallied to $32.08 after the Fed rate cut was announced.

Intel plunged in the opening hour of trading but began stemming losses in afternoon trading. Cisco's shares, though, fell early by 3.2 percent and continued falling to 4 percent to $23.21 a share.

Telecom stocks followed the same trend with an early morning plunge followed by a modest rally in the afternoon.