The new year has yet to bring many happy returns for high-tech stocks, which continued their stumble Tuesday amid long-standing earnings fears and concern about a cooling economy.
The Nasdaq composite stock index fell almost 178.66, or 7.23 percent, to 2291.86, its lowest close since March 1999. The decline represented the seventh-largest percentage fall ever for the index.
Similarly, the E-Commerce Times stock index, which monitors 10 prominent dot-coms including Amazon and eBay, fell 7.93 percent.
Although a widespread tech stock sell-off in December helped reduce stock prices, wary investors spurned the bargain shares.
Tech Downgrades
Adding to the unease in the sector were a batch of downgrades Tuesday in the Internet infrastructure and business software development arena by investment bank Robertson Stephens.
The firm said that although it had "previously viewed
[those sectors] as relatively immune," it now believes information
technology spending environment 
is "weakening."
Among the companies targeted by Robertson Stephens were data-storage company
EMC (NYSE: EMC), which fell $12.19, or 18.33 percent, to close at 54.31;
e-commerce software security developer VeriSign (Nasdaq: VRSN) 
(Nasdaq: VRSN), which slid
16.69 percent to close at a 52-week low of $61.81; and Network Appliance
Corp. (Nasdaq: NTAP), which shed $12.75 to close at $51.44.
Network-enhancing software maker Inktomi (Nasdaq: INKT) was downgraded by both Robertson Stephens and influential Merrill Lynch analyst Henry Blodget, who said that he expected slower spending by consumers in the sector. Inktomi lost $3.31, or 18.51 percent, to close at a 52-week low of $14.56.
In addition, industry giants Cisco Systems (Nasdaq: CSCO) and Sun Microsystems (Nasdaq: SUNW) both fell to some of their lowest levels in a year. Cisco lost $4.94, or 12.92 percent to close at $33.31, while Sun dropped 8.75 percent to close at $25.44.
Manufacturing Slowdown
The market also received bad news Tuesday from the National Association of Purchasing Management's monthly manufacturing index for December, which showed that U.S. manufacturing during the month hit its lowest level in a decade.
The new low for manufacturing confirmed fears that the U.S. economy is slowing down.
Cautious Optimism
Despite the poor start for tech stocks in 2001, analysts remain cautiously optimistic about tech stock performance and an upswing in earnings momentum in the second half of the year, led by forecasted interest rate cuts by the U.S. Federal Reserve later this month.
Although many formerly high-flying Net stocks crashed in 2000, analysts say that technological growth will continue.
"The Internet infrastructure build-out should continue in all but the worst
circumstances," Merrill Lynch first vice president Steve Milunovich
reportedly wrote Tuesday in a note to clients. "We expect companies to use
Web technologies more to gain internal efficiencies than drive new revenue
streams in 2001."
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