US high technology stocks are finally in a bear market, according to leading analysts. And they are likely to drag the rest of the US market and many European markets down with them.

High technology stocks have been leading the falls in the US market over the past weeks. The technology dominated Nasdaq index has done even worse than the Dow, falling over 12 per cent since peaking at 1,249 on June 5th.

Analysts say this is unsurprising given that the "high techs" chased the market up since the beginning of the current bull cycle in late 1994.

Mr Colin Bond of Madoff Securities in London which specialises in US stocks, said the second quarter earnings from many of the technology stocks have "absolutely died on their feet".

However, better than expected results from Intel bucked the market a little. It was the first time Intel's quarterly profits have topped the $1 billion mark. Revenues rose 19 per cent to $4.62 billion from $3.89 billion. Industry analysts said the results exceeded most Wall Street expectations, providing a sense of relief to anxious markets.

Nevertheless, people now realise that any turnaround has been put back into next year, Mr Bond said. "The stocks are coming from very inflated heights and the disappointing earnings have coincided with that."

The collapse in chip prices as well as the slowing earnings have also hit many companies badly. Profit warnings from companies like Hewlett Packard, Motorola and Texas Instruments have resulted. "This has made people realise the high tech sector is not the place to be," he added.

Hewlett Packard is building a plant in Leixlip where it plans to employ over 1,100 people manufacturing ink cartridges. These jobs are not expected to be affected by the profit waning. Digital, however, announced it would cut 7,000 jobs over 12 months after it warned that quarterly results would be disappointing.

Despite hopes that Intel's results would give people a reason to buy technology stocks, the sector failed to gain any real momentum.

Added to that are worries that US interest rates are about to rise, said Mr Jim Power, chief economist at Bank of Ireland Treasury. "If interest rate start moving up corporate earnings will be hit even harder, says Mr Power. "People are also completely unsure how far they will have to go. There is now broad recognition that the Fed should have raised rates a month ago so how far they will now have to go to get ahead of the market is not sure," he added.

The other factor which has hit the stocks is that they were widely held by institutions. "Institutions tend to move together, they have a herd instinct," says Mr Bond.

Last week's second quarter profit warnings set alarm bells ringing up and down Wall Street as well as in London and Tokyo. The resulting sell off in the stocks has been ferocious. IBM fell over 4 per cent to $901/8, its lowest close since January 17th when it fell to $875/8.

Digital Equipment has hit a 52 week low at $311/8 and Texas Instruments also fell to its lowest level in over a year, although it picked up slightly later in the week to close at $443/4.

Irish companies listed in the US have also been hit. Elan lost over 9 per cent over a week. It is down to $51 from highs last week of $56. The company told investors then that it is "very confident" about the second quarter. It is due to report first quarter, results to the end of June next week. Those results will be watched carefully, analysts said. However, they warned that falls in the Dow are likely to feed through to the stock.

CBT, the Dublin based computer training company quoted on Nasdaq also suffered. It is down to $40 from over $45 despite reporting a doubling in second quarter pre-tax profits only last week.

Other major measures of the high tech sector have also taken a battering. The Morgan Stanley High Tech 35 Index, which measures blue chip technology issues, lost nearly 7 per cent this week, more than 22 per cent off its highs of last November.

The Nasdaq slumped over 4 per cent to 1060.14 on Monday, the lowest level since a finish at 1097.14 on April 11th. It has since retraced slightly to between 1070 and 1080.

Microsoft and Micron Technology have also posted serious losses. Intel rose after it announced record second quarter results on Tuesday.

Analysts also point out that the Nasdaq index has seen some "truly crazy" multiples. Start up companies with little earnings have become firm favourites. Many of these Net "concept" stocks have crashed within weeks of their launches.

"The market is headed lower. In a bear market you get rapid falls with the odd short covering rally," an analyst said.

"The only good thing that may come of this is that US prices will come back to a level where Europeans will feel comfortable buying and will be able to afford it."

He added that another 500 to 600 points off the Dow would probably be a buy signal for many British institutions.