Despite financial market volatility, U.S. technology companies had a strong 2007. The rising cost of energy, fears of recession and forecasts of a slowdown in IT spending, however, point to a rocky 2008.

Despite losses at the beginning of the week, the Nasdaq Composite Index, heavily weighted with technology stocks, closed Monday with a 9.8 percent gain for the year -- its biggest increase since 2003. The jump came despite fears that falling housing prices would drag down the economy and that tech companies would not be immune to cautious business and consumer spending.

The housing panic caused a slump in the Nasdaq in the third quarter. But IT investors looked to the bottom line: Tech earnings stayed strong throughout the year, buoying trader confidence. In a range of technology sectors, IT bellwethers such as IBM, Google, Apple and Oracle announced record quarters.

But tumult in markets this week could be a harbinger of things to come. Tech shares on the Nasdaq slipped before and after the Jan. 1 holiday. Traders are nervous because the dust has not settled from the housing crisis, which affects consumer spending as well as the financial sector. Rising energy costs also affect both consumers and businesses, and this week the price of oil hit the US$100 per barrel mark, sparking inflation concerns.

A U.S. Labor Department report on Friday said that nonfarm industry jobs rose 18,000 last month, the smallest increase in more than four years, while the unemployment rate rose to 5 percent. The Nasdaq responded, dipping by about 2.6 percent by early afternoon. Even industry stalwarts slumped, with Google trading at $668, down 16 percent from its opening, and IBM shares going for $101.76, down by 2.9 percent.

Most IT analysts are predicting slower growth for technology. U.S. IT investment, for example, will increase by 4.8 percent in 2008, compared to 5.3 percent in 2007, according to Forrester Research.

Coming off a strong earnings year in which hardware sales fared better than expected and consumers continued to flock to the Internet, there are bright spots, however. For example, comScore reported this week that during the Nov. 1 to Dec. 27 holiday season, U.S. consumers spent about $28 billion online, a 19 percent increase compared with the year-earlier period.

Citigroup Global Markets this week said that Amazon, with good margins and attractive digital media offerings, is in a good position. It upgraded its advice on the company from "hold" to "buy" Wednesday, and shares jumped by $3.61 to close at $96.25.