Sharp losses for technology sector

Risk assets took another beating in the final session of a volatile week on Wall Street, with technology stocks suffering particularly sharp losses after disappointing earnings from some of the key players in the industry.

Micron Technology, the chipmaker, saw the deepest losses on the S&P 500, falling 14.5 per cent to $7.21 after reporting a 92 per cent drop in earnings late in the previous session.

Oracle, the business software and hardware giant, fell 4.1 per cent to $31.14 after reporting lacklustre growth in its hardware segment. The losses came despite a 36 per cent rise in overall fourth-quarter earnings.

These losses helped weigh on the technology sector, which was down 1.8 per cent, the worst performing on Wall Street.

Other cyclical sectors also suffered as investors continued to worry about the uncertain situation in Europe and were mostly reluctant to buy in case of bad news over the weekend.

The industrial and financial sectors were down 1.2 per cent and 0.7 per cent, respectively. Among those stocks to lose ground were General Electric, which fell 2.2 per cent to $17.97, and Morgan Stanley, which declined 0.6 per cent to $22.21.

These losses left the S&P 500 down 1.2 per cent to 1,268.45, a loss of 0.2 per cent over the week, leaving it on track for its worst month of losses in a year.

The declines came despite some slightly better than expected economic data. The session saw GDP growth for the quarter revised up to 1.9 per cent from 1.8 per cent by the Bureau of Economic Analysis. This was an improvement, but still a far cry from the 3.1 per cent GDP growth posted in the fourth quarter of last year.

Durable good orders also rose by a stronger-than-expected 1.9 per cent in May on a rebound in demand for transportation equipment.

“The economic data were a little better, but there was so much uncertainty going into the weekend that investors were reluctant to buy into the markets,” said Jeff Cleveland, senior economist with Payden & Rygel.

The Dow Jones Industrial Average was down 0.9 per cent to 11,937.30, leaving the index down 0.6 per cent over the week. The Nasdaq Composite was 1.3 per cent lower to 2,652.89 on Friday, but still up 1.4 per cent over the week.

In deal news, Williams, a natural gas group, launched a $4.9bn cash bid for Southern Union in an attempt to break up an already agreed deal between the target and Energy Transfer Equity.

The prospect of a bidding war left shares in Southern Union up 16.9 per cent to $39.92 and ETE down 5.6 per cent to $43.03. Williams was down 2.3 per cent to $28.55.

Airline stocks suffered substantial losses in the session led by United Continental Holdings, which fell 8.5 per cent to $23 after providing a disappointing guidance. Delta Airlines declined 4.9 per cent to $9.45 while Southwest Airlines lost 0.4 per cent to $11.36.

Airline stocks pared all of the gains that has been won in the previous session on the sharp drop in the oil price.

The week on Wall Street began upbeat as investors bought into a depressed market that had seen nearly seven straight weeks of losses.

But sentiment reversed on Wednesday after Ben Bernanke gave a cautious assessment of the US economy in a news conference, which then set the tone for the rest of the week.

The markets reacted badly to news that the Federal Reserve had cut US growth forecasts, raised inflation estimates and offered no hope that there would be another round of monetary stimulus.

Sentiment throughout the week was also weighed on by concerns over the sovereign debt crisis in Europe, which absorbed much of the interest and attention of traders.

“The 800 pound gorilla is still the uncertainty over Greece,” said Anthony Chan, chief economist at JPMorgan Private Wealth Management.

Financial stocks were some of the worst performers of the week, weighed on by these concerns.

Bank of New York Mellon was down 6 per cent over the week to $24.64 while SunTrust Banks fell 4.5 per cent to $25.