Wall Street Beat: June starts slow but hope for tech in 2012 remains

Tech shares drop in wake of jobs market report

By , IDG News Service |  IT Management

June is off to a rocky in the markets for technology companies as shares slump in the wake of troubling economic reports, though cooler heads appear to have confidence in the sector for the long term.

The Nasdaq computer stock index was down by 2.27 percent, or 24.92 points, to 1495.70 in Friday afternoon trading. Stocks in general dropped Friday after the Department of Labor issued a report saying that U.S. companies added only 69,000 jobs to their payrolls in May. It was the smallest jobs gain in a year, and missed forecasts that called for almost 160,000 new jobs. What's more, the unemployment rate increased to 8.2 percent from 8.1 percent, the government report estimated.

The Dow Jones Industrial Average declined 216.72 points to 12,176.73, the Standard and Poor's 500 declined 26.37 to 1,283.94 and the tech-heavy Nasdaq dropped 64.66 to 2,762.88. The Nasdaq's decline, dropping by 2.27 percent, was the greatest drop in percentage terms.

Continued reports this week that Spain or Greece, under the burden of massive debt, might leave the Euro zone, have made prospects for continued economic recovery as uncertain as they have been over the past few years.

Tech companies across the board have been hit. IBM was down Friday afternoon by US$3.34 to $189.57; Cisco was down $0.28 to $16.05; Microsoft dropped $0.57 to $28.62; and even the mighty Apple was down $13.13 to $564.53. Facebook -- whose IPO two weeks ago was marred by technical glitches, the after-the-fact realization that the offering was overpriced, and allegations that the lead underwriter, Morgan Stanley, may have committed infractions of financial rules by telling a small circle of people about a downward revision in revenue forecasts -- was down $1.75 to $27.84. Facebook shares are now well below the $45 hit on its IPO day.

Nasdaq computer stocks are now down more than 12 percent from their highs earlier in the quarter.

With earnings season a month away, market watchers trying to get a sense of the year ahead are focusing on macro economic news, various market research reports and week-to-week news from leading tech vendors.

Factory revenue in the worldwide server market decreased 2.4 percent year over year to $11.8 billion in the first quarter of 2012, according to a report from IDC released this week.

It was the second consecutive quarter of year-over-year revenue decline, according to IDC. One reason for the year-over-year slump was that the server market in 2011 experienced an uptick as companies refreshed their computing infrastructure, making it difficult for manufacturers to achieve relative gains this year.

Nevertheless, there are other reasons to be concerned.

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