Calling the crash -
Here's Reuter's take:
Could Rate Fears Pop Tech Bubble?
Feb 20 12:59pm ET
NEW YORK (Reuters) - With technology stocks mostly protected from saber-rattling about the need for more interest rate hikes, Wall Street speculates the magic shield around these issues could lose some of its power this week.
Why? Analysts say part two of Federal Reserve Chairman Alan Greenspan's testimony before Congress in mid-week may be the catalyst, forcing investors to rethink galactic tech valuations at a time when borrowing costs are expected to rise.
Technology may still deliver fat gains as interest rates move up, Wall Streeters say. But they also warn that there will come a time when increasing lending costs will force Corporate America to cut back on capital spending, hurting highfliers like computer and software makers.
``As investors digest the Greenspan news, the question is at what point do they believe technology stocks will be affected by higher interest rates,' said George Rodriguez, senior vice president at Guzman & Co. in Jersey City, N.J. ``It is bound to happen.'
In fact, the Nasdaq composite index (.IXIC), which features some of the biggest names in tech including software behemoth Microsoft Corp. (MSFT.O), last week finally showed signs of caving in to interest rate pressures.
On Friday, the technology-rich index slid 137 points, or more than 3 percent as Wall Street fretted over hawkish comments Greenspan in congressional testimony had made the previous day. But the Nasdaq still ended up about 0.37 percent for the week at 4,441.
This week's second part of the Humphrey-Hawkins testimony to the Senate is not expected to differ from Greenspan's comments last week before the Banking Committee of the House of Representatives. But there is always the chance he may trigger more alarm in a question and answer session that follows.
On last Thursday, Greenspan signaled that more rate hikes may be necessary to prevent the economy from speeding out of control, sending the Dow Jones industrial average (.DJI) down 1.97 percent, or 205 points, for the week to 10,219.
The slide shoved the 30-stock index back into correction mode as fell more than 10 percent -- 11.10 percent to be exact -- from its Jan. 14 closing high of 11,722.98.
``There is certainly a good part of the market that has sensitivity to interest rates,' said Rick Meckler, senior managing director at Liberty View in Jersey City, N.J. ``But if interest rates keep going up, there will be less capital spending which means that starting with PC makers to all they way down the line will see some slowdown in spending.'
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