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Techs slip as analysts reevaluate rally

Technology stocks weaken as investors hold out for Tuesday's Federal Reserve meeting and analysts debate whether the rally has gone too far, too fast.

Technology stocks were weak Monday as investors held out for Tuesday's Federal Reserve meeting and analysts debated whether the rally has gone too far, too fast.

The Nasdaq composite index was down 29.14 points, or 1.4 percent, to 1,992.12, and the Dow Jones industrial average was off 128.01 points, or 1.2 percent, to 9,921.45. CNET's technology indexes were down across the board.

Analysts are saying the rally that has lifted the Nasdaq and Dow during the past three months may have been ahead of an economic recovery.

"When the rally began, the broad stock market (on our model) was modestly, attractively valued, and investors were finally becoming aware of equity risk," said Banc of America Securities analyst Tom McManus, who recommended Monday that investors reduce the equity portion of their portfolios to 55 percent from 60 percent.

"The market's progress since then seems excessive, given the challenging environment," McManus added.

Merrill Lynch analyst Richard McCabe was more optimistic. "The market appears to be resuming its post-September recovery trend after a brief and shallow late-November pullback, and further gains seem likely to develop in coming weeks," McCabe said.

Regardless of their position on the rally, analysts are unanimous in their belief the Federal Reserve will trim interest rates at its Tuesday meeting.

"We anticipate a 25 (basis point) cut tomorrow, with language that reminds us all that the end of the process is near," McManus said.

In technology news, new roadblocks to Hewlett-Packard's proposed merger with Compaq Computer were weighing on shares; HP's largest shareholder decided against the merger. HP shares fell 52 cents, or 2 percent, to $23, and Compaq shares plunged $1.62, or 14 percent, to $9.70.

JDS Uniphase also lost ground. Shares were down 58 cents, or 5.5 percent, to $9.95. The maker of fiber-optic components was the most actively traded stock on the Nasdaq after it reiterated previous sales estimates for the second quarter and reported that sales in the March quarter could fall a further 15 percent.

Competitor Nortel Networks tumbled 56 cents, or 6 percent, to $8.28.

AT&T was down 78 cents, or 4.4 percent, to $16.90. The telephone and cable television company said it has not decided on the future of its cable-TV unit and is still talking to suitors that may buy or invest in it.

Among other actively traded shares, Intel was off 29 cents to $32.95, Oracle fell 49 cents to $15.42, and Microsoft lost 77 cents to $67.06.

AOL Time Warner fell $1.98, or 6 percent, to $31; Yahoo rose 15 cents to $17.82; and Amazon.com lost 6 cents to $11.65.

Staff and Reuters contributed to this report.