* Semi index down, just above 50-day moving average
* Indexes down: Dow 0.7 pct, S&P 0.8 pct, Nasdaq 1.4 pct
* Brent crude lower after hitting highest since Sept. '08
* For up-to-the-minute market news see []
(Updates to close)
By Edward Krudy
NEW YORK, March 7 (Reuters) - Technology stocks sold off on
Monday, with the Nasdaq teetering on a key technical support
level as uncertainty over higher oil prices looks set to drive
volatility in the days ahead.
The Nasdaq composite index <> dropped 1.4 percent and
closed just above its 50-day moving average, a widely followed
technical level that if breached could signal more declines in
the sector that has helped lead the market rally.
Wells Fargo downgraded the semiconductor sector, noting its
strong upward moves. The PHLX semiconductor index <.SOX> has
risen 130 percent since March 2009. The index also is up 45
percent since the start of September, while the broad S&P 500
has advanced about 25 percent in that period. For details, see
[]
Also weighing on Nasdaq, communications equipment maker
Ciena Corp <CIEN.O> forecast weaker-than-expected sales,
sending its shares sliding 9.2 percent to $25.98.
Investors "are jumping on an opportune seasonal slowdown
that typically happens between March and July for tech," said
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in
San Francisco. "It has been one of the leadership groups since
August."
Brent crude has been on investors' radar as analysts and
economists gauge how it might hurt economic demand if prices
continue to rise. Crude edged lower on Monday after hitting its
highest since Sept. 2008 on conflict in the Middle East. Brent
crude <LCOc1> dipped 0.8 percent to $115.20 a barrel.
The Dow Jones industrial average <> dropped 79.85
points, or 0.66 percent, to 12,090.03. The Standard & Poor's
500 Index <.SPX> fell 11.02 points, or 0.83 percent, to
1,310.13. The Nasdaq Composite Index <> lost 39.04 points,
or 1.40 percent, to 2,745.63.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Leading hedge fund managers raised bets on commodities in
the fourth quarter, moving beyond gold to shares of raw
materials producers. For details, see []
For other stories, see []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Wells Fargo said downgrading the semiconductor sector to
"market weight" from "overweight" was "an indication of a
moderate though still optimistic view."
Even though gains in semis have outpaced the broader market,
the S&P 500 and the semiconductor index have been moving in the
same direction, which could mean further declines in the sector
and spell more of the same for the overall market.
A 20-day correlation between the S&P 500 and the
semiconductor index <.SOX> was at 0.92, with a reading of 1
suggesting a perfect correlation.
Tech has been a favorite of analysts, along with other
cyclical sectors.
The CBOE volatility index <.VIX> rose 8.2 percent to 20.63.
Joe Kinahan, chief derivatives strategist at TD Ameritrade in
Chicago said investors were insuring against a possible fall
below 1,300 for the S&P 500.
"If we break this level the S&P could continue all the way
down to 1,275. So many investors are trying to get ahead of
this by paying up for portfolio protection in the form of index
and equity options," he said.
Worries about the effects of recent higher oil prices on
the economy have been a negative for stocks, but analysts
recommend buying the energy sector.
"Industrials are ultimately affected by energy prices, so a
sector that works as a hedge would be the energy sector," said
Bryant Evans, investment adviser and portfolio manager at Cozad
Asset Management in Champaign, Illinois.
Copper suffered its biggest one-day decline in nearly four
months as rising oil prices and geopolitical instability fanned
recovery doubts. That weighed on the materials sector. Freeport
McMoRan Copper and Gold Inc <FCX.N> fell 3 percent to $50.14.
The bearish views overshadowed enthusiasm about Monday's
deal news.
Western Digital Corp <WDC.N> jumped 15.6 percent to $34.68
after the world's No. 2 computer hard drive maker agreed to buy
Hitachi Ltd's <6501.T> hard disk drive operations for about
$4.3 billion in cash and stock. []
Also, TomoTherapy Inc <TOMO.O> shot up 24.5 percent to
$4.57 after Accuray Inc <ARAY.O> said it will acquire the
smaller rival in the radiation oncology field.
Volume was about 7.92 billion shares on the Nasdaq, NYSE
and AMEX, below the daily average of 8.47 billion for last
year.
On the NYSE about three stocks rose for every one that fell,
while on Nasdaq seven stocks rose for every two that fell.
(Additional reporting by Caroline Valetkevitch and Doris
Frankel; Editing by Kenneth Barry)
