Portable Alpha Daily: Investors Worried About Tech

Wall Street started the week on a sour note, with brokerage downgrades, less-than-stellar earnings reports and good old fashioned fear driving the broad-market indexes lower. A major drag on the Dow was The Boeing Co. (BA), down over 3% after Wachovia Corp. (WB) lowered it’s rating to “market perform.” But perhaps even more significant is the en masse selling of tech shares despite earnings reports which are more or less in line with analyst expectations. With Wall Street accustomed to earnings statements obliterating expectations, investors aren’t sure how to interpret a return to normalcy. And with even more big tech companies such as Microsoft Corp. (MSFT) and Qualcomm Inc. (QCOM) reporting later in the week, caution was the name of the game on Monday.

The Dow Jones Industrial Average, with it’s biggest one-day loss in almost two months, lost 88.37 points, or 0.70 percent, to end at 12,477.16. The S&P 500 Index slipped 7.55 points, or 0.53 percent, to finish at 1,422.95 and the NASDAQ Composite Index declined 20.24 points, or 0.83 percent, to close at 2,431.07.

Trading on the NYSE was below average, with about 1.50 billion shares changing hands compared to the 1.84 billion daily average for last year. Declining shares outnumbered advancing shares by about 7 to 4. Even the NASDAQ saw sub-par volume, with about 2.01 billion shares traded compared to the 2.02 billion daily average last year. Decliners outnumbered advancers by about 2 to 1 on the tech heavy index.

Energy traders should feel a bit of whiplash with oil prices up early in the session thanks to colder weather in the Northeast followed by significant declines in the face of contract expiration. On the day, February crude gave back 86 cents to settle at $51.13 a barrel.

Gold prices fell thanks in part to the decline in oil prices. COMEX February gold lost $2.30 to settle at $634.10 an ounce.

Even though stocks fell amid worries and downgrades, investors didn’t abandon ship in favor of treasuries…yet. The absence of significant economic data yesterday held volume on the U.S. Treasury Market relatively low. Nevertheless, the benchmark 10-year U.S. Treasury note closed up 4/32 in price at 98-29/32 for a yield of 4.77 percent. The two-year note ended up 2/32 in price at 99-22/32 for a yield of 4.92 percent while the 30-year bond was up 8/32 in price at 94-17/32 for a yield of 4.85 percent.

The Treasury Department will auction $8 billion in 20-year Treasury Inflation-Protected Securities (TIPS) today, followed by $20 billion in two-year debt on Wednesday and $13 billion in five-year securities on Thursday.

The dollar closed up against major currencies on Monday. Against the Euro, the dollar closed at $1.294 while it closed at 121.67 against the Yen. The U.S. Dollar Index was up 0.18 percent at 85.04 from a previous close of 84.89.

Wall Street also brought down the European markets with the FTSEurofirst 300 Index closing down 0.4 percent at 1,513.5 points. London's FTSE 100 Index slipped 0.3 percent, Paris's CAC 40 lost 0.6 percent and Frankfurt's DAX retreated 0.9 percent.

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