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Nasdaq bounces back but US IT budgets slip

The day after Nasdaq fell to a two-year low, the technology market bounced back to record a 14 per cent rise, the biggest single-day gain in its history.
Written by Jon Bernstein, Contributor

The day after Nasdaq fell to a two-year low, the technology market bounced back to record a 14 per cent rise, the biggest single-day gain in its history.

And the cause of this change in fortune? The actions of one man - Alan Greenspan, chairman of the US Federal Reserve - who ordered a surprise half-point cut in interest rates. The Financial Times, however, refuses to go overboard. "With leading technology stocks barely recovering from the day before's big losses," it writes, "the move was widely seen as only the first step needed to repair the damage." Indeed the good news for the markets is offset by bad news elsewhere. All the papers cover the latest dot-com misfortune, the closure in the UK of online toy store, eToys. According to The Guardian, the US-owned retailer blamed the closure - which will result in 74 job losses - on difficulties raising cash and poor Christmas sales at home. What makes the announcement all the more difficult to swallow is news that etoys.co.uk doubled its Christmas revenues this year and has attracted a customer base of 90,000. It seems, too, that the computer industry at large is not immune to a general downturn in fortunes. According to Merrill Lynch which tracks the purchasing behaviour of 50 US and 20 European CIOs of large organisations found that IT budget growth in the United States could slow to around 5 per cent this year compared to 11 per cent in 2000. European spending patterns remain steady, however, with 13 per cent budget increase little changed from 14 per cent in 2000.
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