Stock markets globally continued to fall this week over a range of concerns, from fears of debt default in Greece to concerns over unemployment in the U.S. and the strength of the global economic recovery.
Technology shares have fallen in step with global stock markets, despite continued strong earnings report from companies.
Networking giant Cisco Systems led the way this week with quarterly earnings-per-share that soundly beat analysts’ estimates as business picked up for the company.
“During the quarter we saw dramatic across the board acceleration and sequential improvement in our business in almost all areas,” said John Chambers, chairman and CEO of Cisco, in a statement. He later added that the economic recovery is clearly entering a new phase.
“Every time we’ve seen anything close to this, we’ve seen a very solid recovery,” he said. “It feels good.”
Cisco is closely watched by technology sector analysts for signs governments and corporations are buying its networking gear to upgrade and expand Internet and communications infrastructure.
The positive earnings report came at the heels of other strong earnings news from a range of technology industry bellwethers, from IBM and Intel to Microsoft and Google.
Despite the earnings hoopla, stock markets around the world continue to fall.
The technology-heavy Nasdaq Composite Index dropped 3.0 percent Thursday to close at 2125.43. The index is down 8.6 percent compared to its 52-week high of 2326.28, which it reached Jan. 11. The Thursday close also leaves the index down 6.3 percent since the start of the year.
The broader market Standard & Poor’s 500 index fell 3.1 percent Thursday to 1063.11. That index is down 7.6 percent from its 52-week high of 1150.45 on Jan. 19 and down 4.7 percent since the year began.
In Asia, Japan’s benchmark Nikkei stock index fell to a 7-week low in early trading Friday, 10,036.33, which is also down 8.6 percent from its recent high of 10,982.10 on Jan. 15. Taiwan’s technology-heavy TSEC weighted index reached a 3-month low of 7244.06 early Friday, down from its recent high on Jan. 19 of 8188.11.
The pullback in global semiconductor stocks in particular appears to be driven by fears of a build-up of inventories, but inventories actually remain low, according to John Pitzer, chip industry analyst at investment bank Credit Suisse.
“Inventory levels are/were unsustainably low, but the restock is not close to causing yellow warning flags,” he said in a report on Tuesday.
Chips are at the heart of every electronics device and, increasingly, in other gear including home appliances and autos. The chip segment is closely watched for signs of overall technology industry health.
“Today, demand is very, very strong,” said Carlo Bozotti, president and CEO of European chip giant STMicroelectronics, at a press conference in Taipei on Thursday.
“The recovery started in the second quarter [2009] for us in Asia, particularly in China,” he said. “But now it is more global. In fact, during the third quarter and fourth quarter, the recovery was positively impacting other regions, first in the United States and now finally Europe, so it is a more global recovery and demand is very strong across the board, from a geographical point of view and across the board from a market segments point of view.”
(Stephen Lawson in San Francisco contributed to this report)