Tech stocks slammed amid House rejection of bailout plan

Last summer, companies such as Hewlett-Packard, Dell, and Apple showed buoyancy amid a gathering economic storm in the US, giving investors confidence they could weather the storm. This afternoon, the storm was upgraded to a 'Cat-5.'"

In the clearest indication to date that the US technology industry cannot sustain its position as the fortress in the storm forever, a precipitous drop in stock values slammed values of shares in technology firms perhaps worst of all. Falling off of a cliff today are shares of Apple Inc., which at one point lost as much as 28% of its value at about 1:50 pm EDT, before recovering slightly to an 18% loss by 2:30 pm EDT at $105.48 per share -- still a 52-week low.

At just the time when Apple hit its worst point, the House of Representatives voted down the $700 billion economic bailout plan promoted earlier in the day by President Bush. The final vote was 205-227, with House Republicans breaking with the President and leading opposition to the plan.

But for Apple, the bad news didn't just come from Washington. Early this morning, analysts at Morgan Stanley (one of the nation's two remaining large investment banks, along with Goldman Sachs, which would have benefitted from the bailout) cut Apple's rating from "overweight" to "equal-weight," according to MarketWatch, citing a possible sharp downturn in demand for PCs for the remainder of the year, particularly in the premium segment.

By 2:30 pm EDT this afternoon, shares in Hewlett-Packard also traded lower by almost 6% to just over $45 per share. Manufacturers seen as having greater exposure to consumer PCs and lower-end products fared better; Dell shares, for instance, had dropped just 2.6% in the same period to about $16.55. But in the software segment, companies seen as having ties to business servers were among those taking the worst hit, with Citrix shares (Xen) down 11.5% to $24.78, and VMware shares down 13.7% to $25.07.

Microsoft shares traded down as much as 7.4% to $25.50 by 2:10 pm EDT, but recovered immediately to just over $26 by the bottom of the hour.

This morning, a Kaufman Bros. analyst voiced concern about Google's possible exposure to the downturn, given its reliance upon advertising revenue. Its stock traded down over 9% by 2:45 pm EDT, down about $39 to about $393.43. Yahoo shares traded down more mildly by comparison, down over 5%.

By close to 3:00 pm ET, CNNMoney.com's average of 24 of the nation's computer manufacturing stocks had fallen in value by just under 10% over the previous Friday's close. Internet stocks had fallen by 7.6%, software stocks on average fell by about 6%, and CPU and semiconductor stocks had fallen by about 6.4%.