An early rally in technology stocks Monday ran out of steam by midday, leaving the Nasdaq Composite Index drifting in a narrow range.
The index was at 2,273.82, up 11.31, led by a US$2.44 gain in Microsoft (Nasdaq: MSFT) to $59.19. The software giant is arguing against a court order to break up the company before a U.S. Court of Appeals.
Technology shares, however, were mostly lower after semiconductor maker Texas Instruments (NYSE: TXN) said that first-quarter results will be below previous expectations, because a slumping economy “is continuing to constrain demand for technology products.”
Reports that Merrill Lynch downgraded Texas Instruments did not help.
Tender Techs
“Techs remain tentative and somewhat tender in the market at the moment,” said Alan Ackerman, market strategist at Fahnestock & Co. “Each downgrade that surfaces creates more and more anxiety by investors as to when to commit to buy techs, many of which are selling at deeply discounted levels.”
On Nasdaq, the most active issues besides Microsoft were Cisco (Nasdaq: CSCO), down 88 cents at $26.13, Intel (Nasdaq: INTC), down $1.13 at $28.81, and Sun Microsystems (Nasdaq: SUNW), down 31 cents at $20.50.
Intel said it plans to acquire VxTel, a privately held semiconductor company, for about $550 million in cash.
Economy Slowing
“With a slowing of the economy, buying sentiment is sour, and there’s little to indicate that techs are ready to turn now,” Ackerman told the E-Commerce Times.
The day’s economic news provided further evidence of a slowdown. The National Association of Realtors said sales of previously owned homes fell 6.6 percent in January from December.
The drop, the second consecutive monthly decline, stemmed from declining consumer confidence and a “deteriorating economy,” said the trade group’s chief economist, David Lereah.
Rate Cut Coming?
Some investors are betting U.S. Federal Reserve policymakers will cut interest rates even before their next policy-setting meeting on March 20th, as evidence of a slowdown mounts.
“Wall Street wants to believe that the Fed will step to the plate earlier than March 20th and lower interest rates, but there’s no indication today that that’s a likelihood,” Ackerman said.
3Com Gains
Among the day’s other movers, 3Com (Nasdaq: COMS) picked up 25 cents to $9.28 despite announcing a round of layoffs. The company said it will cut 1,200 jobs as part of a plan to cut costs and compete in a weakened economy.
The E-Commerce Times Index was up 0.48 percent at midday, with gains in Priceline (Nasdaq: PCLN) and Travelocity (Nasdaq: TVLY) offset by losses in Webvan (Nasdaq: WBVN), eToys (Nasdaq: ETYS) and eBay (Nasdaq: EBAY). 
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