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While you were sleeping: Techs rattle Wall Street

Friday 29th January 2010

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Technology stocks took Wall Street sharply lower after Qualcomm and Motorola disappointed investors. Shares in Apple fell, adding to the gloom, as its new iPad tablet computer was harshly criticised by some bloggers.

At midday, the Dow Jones Industrial Average had shed 1.52% and the S&P 500 was down 1.58%. The Nasdaq Composite fell 2.3%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 7.7% to 24.92.

Shares in Motorola plunged 14% after the largest U.S. mobile-phone maker shipped far fewer phones in its latest quarter than a year earlier: 12 million versus 19.2 million. The company today said it would post a fiscal first-quarter loss of US1 cent a share, compared with analysts’ expectations of a US3 cent profit.

The world’s biggest maker of mobile-phone chips, Qualcomm, today cut its 2010 sales outlook and forecast that its second-quarter profit would fall short of estimates. Its stock also plunged 14%.

Shares in Apple fell 4.3% as bloggers unleashed on what they believe were missed opportunities with the iPad. Still, not everyone saw the tablet in the same light. Piper Jaffray & Co’s Gene Munster told Bloomberg that the iPad was “an amazing device” and that investors needed to be patient.

Munster said it could take a year for the iPad to become Apple’s next “breakout” product. He also said Apple might need to lower the price to between US$300 and US$400 from the initial US$499. The iPad will go on sale in March.

Among other active issues, Eastman Kodak surged 20%, Cardinal Health was up 6.55%, Netflix gained 22%, Procter & Gamble rose 2.9% and Time Warner Cable increased 5.4%.

In Europe, the Dow Jones Stoxx 600 fell 1.1% to 244.61. The FTSE 100 fell 1.37%, Germany’s DAX dropped 1.82% and France’s CAC 40 lost 1.89%.

Among the big movers, BHP Billiton fell 2.4%, ArcelorMittal shed 3.7% and AstraZeneca fell 4.6%. Swedish retailer H&M advanced 8.4% on higher than expected net income and Nokia surged 9.9% as it reported better than expected profits and sales.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.26% to 78.88.

The euro dropped 0.3% to US$1.3984 in New York, after reaching US$1.3938, the lowest level since July 14. The euro decreased 0.6% to 125.50 yen, from 126.25. The dollar dropped 0.2% to 89.78 yen, from 90.

“There’s definitely fear of systemic risk within the euro zone right now,” Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut, told Bloomberg amid heightened concerns about budget woes in Greece and Portugal.

Prime Minister George Papandreou told Bloomberg in an interview in Davos that Greece was being victimised by rumours in financial markets as he denied seeking to borrow from European partners to finance the country’s budget deficit.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.38% to 267.73.

Gold eased as the dollar rose amid the euro’s slide. Spot gold was bid at US$1088.35 an ounce at 1450 GMT, against US$1087.25 late in New York on Wednesday. The precious metal had risen as high as US$1095.95 an ounce in earlier trade.

The China Gold Association said Chinese gold output increased 11.34% to a record 313.98 tonnes in 2009, securing the country's position as the world's largest producer of the yellow metal.

Silver rose to US$16.55 versus US$16.54. Holdings of the world's largest silver exchange-traded fund, the iShares Silver Trust, rose 0.5% to 9384.98 tonnes on January 27, it said.

A Reuters poll published on Wednesday showed platinum and palladium are expected to outperform other precious metals this year, with a new wave of investor demand boosting prices in anticipation of increased industrial use.

Platinum was at US$1509 an ounce against US$1502.50, while palladium was at US$422 against US$411.50.

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