Tech stocks slump again

Volatile markets are keeping Wall Street traders on the edge

High-tech companies have seen the value of their shares plummet on Friday, as fears of a new round of interest rate rises stalked Wall Street and European stock markets.

The benchmark index for technology stocks, Wall Street's Nasdaq, dropped at one point by more than 150 points, while London's Techmark index fell a record 8.7%.

The fear of higher interest rates is continuing to sink in

Larry Rice, Josephthal Lyon & Ross

Among the big losers on Wall Street were top firms like networking equipment maker Cisco Systems and chip manufacturer Intel.

The world's largest chip maker revised its first-quarter earnings downwards after some of its circuit boards were found to have a defective chipset.

Telecoms shares had a bad day too, with WorldCom and Spring shares dropping after reports that European regulators might block the $115bn merger of the two companies.

The Nasdaq closed down was down 148 points at 3,390, crashing through the 3,400 points level.

Old economy shares fared only slightly better. The Dow Jones index briefly shed as much as 200 points, but ended trading with a 150 points loss at 10,626.

Trade deficit sparks rate fears

The Street's held hostage by the Fed

Adam Weisman, Wit SoundView

Market makers say the jitters were caused by news that the US economy has chalked up yet another record trade deficit of $30bn.

This has renewed worries that the Federal Reserve, the US central bank, might rise interest rates even further, after a 50 basis points rise on Tuesday. Higher interest rates are considered to harm stock prices, as they make other investments more attractive.

Larry Rice, chief investment officer at Josephthal Lyon & Ross said: "I just think the fear of higher interest rates is continuing to sink in".

Europe tech stocks in the doldrums

This message had been hammered home earlier in the day, when European tech and internet stocks had suffered heavy losses.

Their trouble was compounded by the continuing fallout from the collapse of online retailer boo.com.

Among the stocks dropping sharply were firms as diverse as software company Baltimore Technologies (down 12%), handheld computer maker Psion (15%), chip designer Arm Holdings (10%), internet service provider Freeserve (9%), web travel firm Lastminute.com (8.5%) and online auctioneer QXL (16%) all saw their share price drop sharply.

"Boo.com's collapse has really undermined investors' sentiment towards the technology stocks", said Jeremy Batstone of NatWest stock brokers.

Londons Techmark index plunged a massive 291 points or 8.73% to 3,052.19.

But more established firms were troubled too: Vodafone AirTouch fell over 8%, dragging down the blue-chip FTSE 100 index, which closed the day with a 187.5 points loss at 6,045 - down 3%.

But the same trend depressed share indices across Europe as technology, media and telecoms stocks were marked down sharply.

Baan in deep trouble

In the Netherlands cable company UPC plummeted 21.5% after a lower-than-expected valuation for its soon-to-be floated broadband internet service subsidiary Chello.

Troubled software house Baan spiralled lower yet again, slumping 19% to close at 1.42 euros after hittting a 1.32 low.

German telecoms giant Deutsche Telekom lost 7.8%, enterprise software firm SAP shed 6.5% while electronic components maker Epcos closed down 6.3%.

French tech and media stocks tumbled too - France Telecom down 8.7%, network firm Equant lost a massive 16% and STMicroelectronics fell 9%.

In Finland telecoms stalwarts Nokia and Sonera fell 8.5% and 7.46% respectively.