Shares battered by Intel

Things are getting hectic again on the New York Stock Exchange

US stock markets are suffering heavy losses, and European technology shares have been plunging, in the wake of a profit warning and job cuts at microchip giant Intel.

Investor confidence was also undermined by bad news from Yahoo, the world's leading internet portal, which had issued a profit warning on Wednesday.

The tech rally this week was a bit of a damp squib and the latest news from Intel and Yahoo didn't help

Tony Jackson, ING Barings Charterhouse

As a result, technology shares were hardest hit. The Nasdaq, the world's favourite market for tech stocks, plunged more than 115 points or 5.3%, to close at 2,052.78.

But "old economy" companies, that had held up well during the recent share price plunge, suffered too.

The Dow Jones industrial average lost more than 210 points to 10,644.62 - a loss of almost 2%.

Losses on European stock markets were not as sharp, but bad enough to give investors the jitters.

In London, the FTSE 100 index dropped well below the 6,000 points level again, after having held on just above this psychologically important mark for the past three days of trading.

The City's key index ended the week with a loss of 85.9 points on the day to close at 5,917.

In Frankfurt, the Dax index finished the day at 6,204 - down 63 points or just less than 1%. The Cac 40 index of leading French shares had earlier closed 70 points or 1.28% down at about 5,369.

'Damp squib'

Chip maker Intel is one of the most important companies of the modern information society, on par with its close ally, Microsoft.

"When someone like Intel, who is sort of at the beginning of the food chain, says there is a real cutback in orders... it strikes some fear in the hearts of people," said Rick Meckler of Libertyview Capital Management.

Earlier this week, things appeared to look up for the technology sector. But Tony Jackson of ING Barings Charterhouse described the "tech rally this week [as] a bit of a damp squib".

The market was also depressed by rumours that Cisco Systems, the leading manufacturer of equipment that forms the backbone of the internet economy, would trim its workforce by 5% as part of a cost cutting exercise.

US economic worries

While investors fret over the earnings prospects of technology companies, analysts worry about the overall prospects for the world's largest economy.

Earlier this week, the US central bank, the Federal Reserve, had warned in its monthly report, the Beige Book, that growth would be "sluggish to moderate" at best.

After nine years of economic growth, the US economy is now close to a standstill.

The impact of this slowdown is likely to be felt around the world, which explains the nervousness of stock markets in Europe and the Far East.