Wall Street Beat: Panic Weighs on Tech Gains
Macroeconomic clouds and apparent panic selling on Thursday, which led to the biggest intraday decline on the Dow in history, darkened the horizon for IT investors even though financial results and market surveys suggest technology is on the road to recovery from the recession.
Thu, May 06, 2010
IDG News Service — Macroeconomic clouds and apparent panic selling on Thursday, which led to the biggest intraday decline on the Dow in history, darkened the horizon for IT investors even though financial results and market surveys suggest technology is on the road to recovery from the recession.
Despite the generally positive news from vendors recently, tech shares declined along with markets as investors took in bad news from Europe. Fears that the Greek debt crisis would slow recovery in Europe hit the markets, bringing the broad Dow index down by 3 percent, or 347 points, after plunging about 1000 points during the day. The Dow ended the day at 10520.
Concerns regarding Greece reached a peak Thursday as the European Central Bank, rather than saying that it would support the purchase of European sovereign debt, gave only broad approval of Greece's savings plan.
Media reports suggested that a program or system error caused or contributed to the sell-off -- at one point in the afternoon the Dow declined 500 points in five minutes -- but by the end of the day, none of the major exchanges was reporting errors.
After the close of trading, a spokeswoman at the New York Stock Exchange said there was no evidence that errors had been found in the exchange's trading systems. In the afternoon, various media reports said that Nasdaq officials were investigating, but exchange officials were not available for comment after the market close.
CNBC reported that multiple sources said a human trading error at CitiGroup (C) was largely responsible for the sell-off. A trader entered the letter "b" for billion, instead of "m," for million, just before the sell-off, the report said.
However, by the end of the afternoon CitiGroup said it had not found errors. "We, along with the rest of the financial industry, are investigating to find the source of today's market volatility. At this point, we have no evidence that Citi was involved in an erroneous transaction," according to a statement read by a bank spokesman.
Some market observers noted that computer-programmed trading may have actually helped to right the markets. Programmed trading systems often are set to buy or sell automatically under certain market conditions.
The market turmoil depressed IT vendor shares, as the tech-heavy Nasdaq slipped 4 percent by the end of the day. However, tech financial news was fairly upbeat this week.
Quarterly results from players in different segments of the IT market, including NetSuite (N), Symantec (SYMC) and Cognizant (CTSH), confirmed sales trends from bellwether vendors last month. So far this earnings season, leading IT companies including IBM (IBM), Apple (AAPL), Google (GOOG), Oracle (ORCL) and Microsoft (MSFT) reported either record first-quarter results or sales that were significantly higher than last year during the recession.