Tech sector braces for Wall Street aftershocks

The flight of investors from equities markets into low-yield US Treasury bonds, gold and silver, and other fixed-income instruments has caused a steep decline in technology stocks.

The storm clouds began gathering over Wall Street earlier this month with the US government bailout of Fannie Mae and Freddie Mac. On Tuesday night, the news broke that it had essentially taken over insurance giant American International Group, all of which swooned in the wake of the subprime mortgage crisis.

Also this week, once-stalwart Wall Street investment bank Lehman Brothers declared bankruptcy, while the iconic Merrill Lynch was forced to sell itself to banking behemoth Bank of America. Early Thursday, another blue-chip investment bank, Morgan Stanley, was rumoured to be in merger talks with banking giant Wachovia, after shares of both firms were pummeled.

If Morgan Stanley should fall, that would leave Goldman Sachs as the lone independent investment bank on Wall Street. The carnage doesn't end there. The country's largest savings and loan institution, Seattle-based Washington Mutual, has put itself on the block after losing billions in the subprime mortgage market.

Some relief came on Thursday, with the Federal Reserve and other central banks agreeing to pump hundreds of billions of dollars into the global economy to bolster these flagging players. In late trading, the Dow surged by 3.86%, climbing back above the 11,000 mark. Though it was a huge rally, it still left the index down about 400 points from the beginning of the week.

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