Tech stocks tumble as credit fears cause tailspin in worldwide stock markets
By Colleen Taylor, Contributing Editor -- EDN, August 10, 2007
Technology stocks were not at all immune as the U.S. stock market took a plunge upon opening this morning, with fears of a potential crisis in the credit markets spurring steep declines in stock prices worldwide.
After the opening bell this morning, the Dow Jones Industrial Average quickly plummeted by more than 212 points to hit 13,057.86 just after 10:30 a.m. ET. At around the same time, the NASDAQ market, on which the majority of tech stocks are traded, fell to 2,503.16—two percent below the previous day's close and down a whopping 8.1 percent from the index's status less than a month ago.
Financial analysts say that larger effects of the long-struggling housing market is a major cause behind the widespread plummet. "What began with rising delinquencies on U.S. home mortgages to risky borrowers months ago has evolved into a world-wide flight from risk by investors," according to a Wall Street Journal report. "The ripple effects have… knocked dozens of lenders out of business, battered an already weak housing market and fueled weeks of stock-market turmoil."
Marking the severity of the situation, the United States Federal Reserve issued a statement Friday morning saying that it would provide "reserves as necessary" in an attempt to help stabilize and reassure the volatile market. On Friday, the Fed said it would accept $19 billion, and then another $16 billion, in mortgage backed securities to provide liquidity to the market; earlier, on Thursday, the Fed injected $24 billion in temporary reserves to the U.S. banking system. Similarly, banks around the world, including the European Central Bank and the Bank of Japan, injected funds this week into their own respective stock markets; according to the Associated Press, this week's events have marked the first time such banks have worked together to add liquidity to the markets since the aftermath of the September 11 attacks in 2001.
As of early afternoon Friday, the Fed's injections into the market seem to have made a relatively positive effect on Wall Street. As of 12:30 p.m. ET, the Dow was at 13,216.62, about 54 points below Thursday's closing price. The NASDAQ stood at 2,543.22, down one-half of a percentage point from Thursday's close.
