Wall Street Beat: Tech shares take a wild ride

IDG News Service - U.S. stock markets edged up for the day Friday afternoon, but fears of an economic slowdown and concerns about the debt crisis in Europe caused technology stocks to seesaw wildly along with shares of companies in other sectors this week.

The heart-stopping gyrations of the Dow Jones Industrial Average index this week tell the tale: On Monday, the Dow plunged 634.76 points; on Tuesday, it jumped 429.92; on Wednesday it dropped 519.83 points; on Thursday it rose 423.37 points. The tech-heavy Nasdaq and the S&P 500 indexes rose and fell in parallel with the Dow.

In Friday afternoon trading, volatility calmed somewhat and shares across a broad range of sectors, including IT, were up for the day, aided by a government report that July retail sales rose higher than they have in four months. The Dow was up by 141.15, the Nasdaq rose by 19.49 and S&P 500 was up 8.64.

Nasdaq computer stocks, which have moved along with other sectors this week, were up 5.74 points in aggregate in midafternoon trading.

Though the consumer market for PCs has been soft this year, enterprise spending on IT has fueled profits for tech vendors. The big concern for tech is whether the market chaos and concerns about the economy -- or, at worst, a slump back into recession -- will cause businesses to curb IT spending and consumers to further cut back on purchases of computers.

Even though the markets seemed to take a breather Friday, economic news was mixed. A survey by Reuters and the University of Michigan showed that consumer sentiment over the last few weeks fell to a 30-year low.

The catalyst to the wild ride on Wall Street was credit rating agency Standard & Poor's announcement, last Friday after the markets closed, that it had downgraded its rating on U.S. debt, citing political paralysis over how to reduce the country's deficit. On Monday, S&P downgraded Fannie Mae and Freddie Mac, the two home financing giants backed by the federal government.

The government's last-minute pact on the deficit reached last week included spending cuts and an agreement to close certain tax loopholes. It allowed the nation's debt ceiling to be raised and avoided a default on obligations such as pay to federal workers and payments to bond holders.

But the brinksmanship shown by congressional leaders during the talks helped push the S&P to its downgrade and spooked investors and businesses alike.

"People may be thinking that if these guys in Washington are prepared to crash the credit rating, what else are they prepared to do," said Andrew Bartels, chief economist at Forrester. "Businesses are likely to be cautious about what they're doing."