Market Trainwreck Headed Towards Tech

By October 13, 2008

Technology stocks have been shaky due to the credit crisis and other financial woes that Wall Street has been facing. Many have been asking just how vulnerable the tech industry is to what will become a global economical development. Even the largest technology stocks have been hit, with the Nasdaq dipping nearly fourteen percent in the last thirty days. The CNET Technology Index , which tracks 66 publicly traded tech companies, saw huge stock selling from the bigger companies, including Google. Technology projects are "normally more resistant to credit problems," says Iain Cockburn, a professor of finance and economics at Boston University. "Tech tends to be less reliant on short-term credit." Different types of companies will suffer different effects, according to ABC News. In the short term, smaller companies will be able to weather this economic downturn. But projects involving new technology, heavy capital and equipment will all be in trouble.

Some of the more obvious effects will be immediate cost- and job-cutting. But as local money sources dry out, companies will have to partner with countries like China, who have more currency on-hand. As well as overseas migration, acquisitions are projected to increase as start-ups and other newcomers run out of cash.

According to The Guardian , there has been choppy trade due to the fears that credit crisis will tip to global recession. The Nasdaq holds comparatively steady due to hopes that technology is not faltering, but a threat remains to extend the market's bear run. There is significant nervousness that more credit problems remain unresolved even after the global central banks coordinated rate cut. The Dow shed 84.10 points, while the Nasdaq Composite Index up 4.81 points today. People are selling stocks from fear for this vulnerable market, but are not necessarily consulting beforehand. The US Securities and Exchange Commission's ban on short selling in more than 950 financial stocks expired, followed by a drop in financial shares.

The projections for the market effects on the technology industry are not identical, but common arguments are emerging. Worry has been stirred up by sectors that seemed previously unrelated, but recent developments show that few areas will be completely safe.

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