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Tech shares torpedo markets

Technology stocks lead the markets lower, driven by disappointing earnings reports from several companies.

Technology stocks led the markets lower today, driven by disappointing earnings reports from several companies.

Earnings news from the semiconductor sector, one of Wall Street's hottest niches for much of the year, was relatively dreary. The Philadelphia semiconductor index fell 70.08, or a hefty 6 percent, to 1,034.20.

"The market is being shortsighted right now," said Brian Belski, a market strategist at U.S. Bancorp Piper Jaffray, who believes that the sell-off in semiconductor stocks is merely a slight cooling of a very hot sector.

The Standard & Poor's 500 semiconductor electronics group is the highest-performing sector so far this year. Advanced Micro Devices is up 160 percent for the year, while Intel has increased about 69 percent.

But Belski adds that such great returns cannot last forever. "These companies are not going to grow at the rate that they were," he said.

The Nasdaq fell 41.85 to 3,987.72, and the S&P 500 index dropped 22.05 to 1,452.42.

The Dow Jones industrial average slipped 183.49 to close at 10,516.48, led by Honeywell International, which dropped $1.81 to $35.13.

Chipmaker LSI Logic led the semiconductor decline. LSI dropped $7.81, or 19 percent, to $32.69 on a volume of 50.6 million shares--more than 12 times the stock's daily average volume.

LSI announced earnings after yesterday's market close, disappointing some investors. The chipmaker reported earnings of 29 cents a share excluding extraordinary items, just meeting analysts' expectations of 29 cents as surveyed by First Call. A number of brokers responded by slashing their ratings on the stock.

Other semiconductor companies were swept up in the pessimism. Shares of chip designer Rambus fell $9.50, or 11 percent, to $75.50, while National Semiconductor dropped $3.63, or 8 percent, to $40.50. Chip giant Intel also succumbed to the negative tide and receded $1.88 to $139. AMD closed down $3.44 at $75.31.

"This is the normal garden-variety paranoia that we get in the tech sector," said Pip Coburn, a technology strategist for UBS Warburg. "It's totally normal, it's totally understandable, and it's the kind of volatility (that exists) in the fishbowl that we live in."

The CNET tech index lost 48.97 to close at 2,869.50. Losers edged out winners, with 74 of the 97 stocks in the index falling, 21 rising and two remaining unchanged.

Almost all of the 18 sectors tracked lost ground today. Internet e-tailers and semiconductor equipment companies took the most punches, falling about 4 percent and 3 percent, respectively. Networking equipment makers were some of the day's only gainers, climbing a slim 0.51 percent.

JDS Uniphase was the most actively traded stock on the Nasdaq. Shares of the fiber-optic equipment maker rose $5.75 to $135.94 on a volume of 199 million shares, more than nine times the stock's average volume. JDS reported earnings today after the markets closed.

Shares of online retailer fell $1.56 to $36.06 after Lehman Brothers cut the stock from a "buy" to a "neutral" rating. reported a second-quarter per-share loss after the markets closed that was slightly less than Wall Street analysts expected. dropped $2.63, or 8 percent, to $28.63, while fellow e-tailer eBay dropped $3.56 to $52.69.

E-tailing software maker Vignette fell $4.88, or 11 percent, to $38.75, on a volume of nearly 19 million shares, almost four times more than the stock's average daily volume.

Vignette reported earnings yesterday that indicated the amount of money customers owe the company is increasing. CNET Networks, publisher of, owns a stake in the company.

Xerox fell $3.19, or about 18 percent, to $15 after reporting lackluster earnings on a volume of 32.9 million shares, more than eight times the stock's average. The stock traded as low as $14.75, a new 52-week low, compared with its high of $60.31.

The company said second-quarter profit fell by half on lower sales, and efforts to turn around operations will take longer than expected.

Software maker Remedy fell $19.72, or about 47 percent, to $22.38 after the company posted lower-than-expected revenue for the second quarter.