Tech finishes strong month

Jitters about the U.S.economy pushed markets broadly down on the first trading day of November, but faith in the IT sector, especially in tech stalwarts such as Google and Microsoft, appears to remain relatively high in the wake of a strong earnings season.

The Dow plunged Thursday, closing at 13567.87, down by 362.14 points or 2.6 percent. This put the brakes on the Nasdaq, which is weighted heavily with IT companies. The Nasdaq closed at 2794.83, down by 64.29 points or 2.25 percent.

Nevertheless, the Nasdaq is still higher than it was during the volatile months of the second quarter. Amid strong earnings reports from IT vendors, the Nasdaq gained 5.8 percent in October to close the month at its highest point since January 2001.

Worry about the soft housing market and its effect on the economy continues to overshadow business in a variety of sectors. Falling housing prices and mortgage defaults have led to concerns that an ensuing credit crunch will dampen both consumer and business spending, even affecting IT vendors.

Though the Federal Reserve Board cut rates, it also indicated Wednesday that rising oil prices might bring a halt to rate cuts for the near future, or even lead to rate hikes. That statement, and a Commerce Department report that said consumers cut back spending in September sparked investors to dump shares across an array of businesses.

Tech sector standouts are holding their own however. Google shares broke $700 Wednesday and stayed above that mark Thursday amid speculation that it will soon announce, with a carrier, some sort of plan to bundle Web application services with mobile devices. Investors are excited because it would mark a major breakthrough in Google’s efforts to expand from its core, PC-based Internet search advertising business.

Most speculation revolves around reports that Google is in talks with Verizon and Sprint Nextel, following a series of articles in the Wall Street Journal and Reuters. Verizon itself kicked off the week with a strong third quarter earnings report, announcing Monday that it added 1.6 million wireless customers and 229,000 new FIOS fiber-based broadband customers during the period.

Verizon’s net income of $4.2 billion was up 19 percent from a year ago. Verizon shares rose Tuesday by $0.39 to close at $45.99, though shares drifted back down during the week.

There is a sea change occurring in the telecom business, as former phone companies outpace cable companies in the race to add customers for new broadband and Internet services.

“Suddenly telephone companies like Verizon and AT&T are doing very well as cable television companies are struggling with their sagging stock price,” said independent telecom analyst Jeff Kagan in an e-mail report. “The marketplace is getting to the point where customers will have a choice between either their telephone company or their cable television company for the same bundle of services.”

The fight for customers among the former phone companies is fierce, however. Sprint Nextel shares, for example, lost $0.52 to close at $16.58 Thursday after it said subscriber losses took a toll on third-quarter earnings, which amounted to $64 million compared to $279 million a year earlier.

In the networking arena, Alcatel-Lucent Wednesday said it plans further layoffs as post-merger results continue to disappoint. The company said Wednesday that revenue for the third quarter was $6.28 billion, a decline of 11.4 percent compared to the combined revenue that the two companies made a year earlier.

Nevertheless, company plans to shuffle execs and curb costs seemed to please investors, and shares rose $0.30 to close Wednesday at $9.69.

Alcatel shares fell back down Thursday as the market declined broadly, but IT was not as badly hit as other sectors.

Coming off a great earnings report last week, Microsoft shares, for example, continue to gain. Company shares rose $0.25 Thursday to close at $37.06. Last week, the company reported its best calendar third quarter since 1999. Net income hit $4.29 billion, a 23 percent jump compared to one year earlier.