Fears over earnings in US technology stocks drag markets down

Wall Street share prices slipped sharply yesterday as investor concern grew about whether the current rise in the market could be sustained. In particular, there are fears that quarterly earnings reports from the major technology companies, due in the weeks ahead, will be disappointing. European shares tumbled to lower closes and Wall Street retreated sharply from the magic 10,000 level.

The Dow closed down over 218 points or over 2.2 per cent. New York traders said the market's retreat bore the markings of the kind of nervous sell-offs that appear with the approach of the reporting season for quarterly earnings. In recent weeks, worries about earnings in a variety of industries - most notably technology - have dragged on the market. Reflecting fears for the outlook for technology stocks, the Nasdaq index on which most of these companies trade closed down over 3 per cent.

European shares had been under pressure all day, undermined by a 2.3 per cent fall in Tokyo shares and a 0.6 per cent fall for Hong Kong, and they were not helped by Wall Street opening weaker and then moving south, away from the 10,000 point hurdle.

Last week it went above 10,000 three times but lost its grip and failed to close above that level.

Britain's FTSE 100 index closed sharply lower, pulled down by falls in British Telecom and index-heavyweight bank stocks such as Lloyds TSB.

Falling for the second session, the FTSE closed down 92.3 points or 1.5 per cent at 6,060.5.

The drop took the FTSE further away from its record close of 6,335.7 set on March 11th and left the index poised just above its 50-day moving average - seen as a key support level, which could signpost further losses to come if breached.

A drop in underlying British inflation to 2.4 per cent, below the government's 2.5 per cent target, provided ammunition for those arguing that British interest rates have further to fall - perhaps as early as the Bank of England's monetary policy committee meeting in April.

Declining rates have in recent months proved a big positive for stock markets on both sides of the Atlantic, as low returns on cash and bonds lured investors into equities.

In Dublin, the ISEQ index lost more than 1 per cent in value, although most of this reflected weakness of the Elan share price in New York.

In Frankfurt, the hefty losses on Wall Street punished Germany's Xetra DAX in late trade, dragging to down to close more than 3 percent weaker. The Xetra DAX closed down 3.26 percent at 4,870.49 points and the floor DAX ended down 2.23 per cent at 4,915.03 points.

On the Paris bourse, stocks tumbled 2.8 per cent with investors spooked by the prospect of a correction on Wall Street.