Tech stocks fall hard as economic immunity doubted

Shares of the world's hottest technology stocks joined hard-pressed financial stocks in a sharp sell-off on Monday as investor fears mounted that the crisis on Wall Street was dampening U.S. consumer demand.
Apple Inc tumbled 18 percent to its lowest close in 16 months after two brokerages downgraded the stock on slowing global consumer demand and a warning by electronics retailer Circuit City of a looming slump in holiday sales.
Other brand names such as Blackberry-maker Research in Motion, Google Inc and Nokia also suffered double-digit percentage price declines following the failure by the U.S. Congress to pass a financial bailout plan.
Apple, which traded near $200 at the end of last year, fell to $100 in intraday trading, while Google slipped below $400 for the first time in two years. On Nasdaq, Apple closed down 17.9 percent, or $22.98, at $105.26 and Google ended off $50.04, or 11.6 percent, at $381.00.
"Investors are no longer selling their losers in tech but have turned to selling stocks that still have meat on the bone," Scott Kessler, head of S&P's tech equities research.
Microsoft shares fell 8.7 percent to $25.01. Brad Smith, the company's general counsel, issued a statement calling on Congress to strongly reconsider the bailout package to "re-instill confidence and stability in the financial markets."
The Morgan Stanley Hi-Tech index of major technology stocks closed down 9.3 percent as all 35 components slumped with the broader Nasdaq Composite index's drop of 9.1 percent — its worst one-day percentage drop since April 2000, the start of the last bear market for technology stocks.
Analysts and investors said some of the hardest hit stocks were those of companies that had been enjoying strong growth despite the U.S. housing crisis. As economic gloom deepens, the Apples and the Googles become vulnerable.
"Nothing has changed fundamentally in many of these stocks," said Jeffrey Lindsay, an analyst who follows Internet stocks for brokerage Sanford C. Bernstein. "But everyone is trotting out their bear market scenarios," he said.
"If there are any more bank failures, then the global economy is going to be in a very difficult position," Lindsay said. "As long as the bailout doesn't happen, all the bear theses start to look true," he said.
Lindsay rejects the bear market thesis, noting that stocks such as Google and even Yahoo Inc have billions of cash on hand to fund operations and no debt on their books. Nonetheless, shares of Yahoo fell to five-year lows, down 10.8 percent, to $16.88.
"The cockroaches of this particular nuclear winter — if this is one — will be Internet stocks," the analyst said.
Not all technology stocks were equally hard pressed. International Business Machines Corp, which serves big businesses but has aggressively diversified into international markets in recent years, fell only 4.2 percent to $114.46.
Analysts said IBM is partly benefiting from being added last week to the U.S. Securities and Exchange Commission's list of stocks that can't be sold short — an investment strategy to profit from a stock's decline.
One buyside analyst who declined to be named said the sell-off in technology stocks has less to do with fundamental business problems than the fact that they remain some of the most liquid to trade and thus are easiest to dispose of. Some asset management firms have faced forced redemptions in recent weeks and tech stock sales are one place to raise cash.
"The tech guys have as much cash on their balance sheets as anyone," the analyst said. "They will survive. The question is when they will thrive?"