There's a raft of downgrades and warnings pouring out of Wall Street today, and no tech sector seems to be as hard hit as computers and the chips that power them. Just to name a few: UBS is cutting targets and estimates for Apple, Dell and HP; Weisel is cutting estimates on Apple; JP Morgan is cutting them on Dell; Citibank is cutting estimates or downgrading some 15 chip makers.

Post-bailout and post-markets crashing around the world. it seems to be dawning on everyone in tech-- whether on Wall Street or in Silicon Valley-- just how bad things are about to get through the rest of the year and into 2009.

I asked Scott Kessler, of Standard & Poor's Equity Research, just how bad holiday shopping looks for tech and where all these warnings were last week.

From Silicon Alley Insider, Sept. 26, 2008:

The Wall Street collapse is terrible for tech, obviously.  But it could be worse.

Forrester Research says the financial sector's troubled firms (Lehman, Merrill, Bear Stearns, AIG, Fannie, Freddie) all together equal about 2% of tech spending. Given Forrester sizes the US tech market at $572 billion, that's about $11.4 billion dollars at risk.

But that's not the worry, says Forrester CEO George Colony:

The biggest risk to the tech market comes, not from the Wall Street collapse, but from a collateral U.S. recession. Forrester expects a mild recession in the U.S. and Europe lasting through Q3 and Q4 of 2008, and Q1 of 2009. While tech spending grew 8% in the U.S. in 2007, we are forecasting tech purchases to be up 5% in 2008, and up 6% in 2009.

But government bailouts are keeping some of those firms and their billions of dollars in tech spending alive. And even in death banks like Lehman and Merill spur Wall Street IT spending. Colony again:

the rigors of mergers and integration could also be drivers of new tech spending. Bank of America, Barclays, and JP Morgan have 36 months of intensive technology integration work ahead -- this will drive professional service, software, and to a lesser extent, hardware spending.

Translation: Bank of America took over Merrill, and Barclays bought Lehman's data centers. The work to get technology and enterprise systems like general ledger and human resources under the same umbrella can be a bonanza for tech consulting firms like Accenture or HP's EDS. But there's probably enough hardware to go around, so not much upside there for players like Sun.

"Tech Firms Rise Above Economic Turbulence" declares a front-page story in Friday's Wall Street Journal, highlighting the strength of results from big-cap bellwethers like IBM this week, especially relative to the ongoing carnage in financials.

Tech has been "a place to hide" during the market's malaise and will rally the most if/when the recovery begins, says Scott Bleier, president of HybridInvestors.com. But tech cannot be viewed monolithically and, of course, expectations play a key role in how stocks trade after earnings are reported, he adds.

Google, most notably, reported an impressive 35% year-over-year revenue increase, but its second-quarter results were widely viewed as a disappointment. Bleier says Google is now paying the price for not giving guidance to analysts, who were expecting earnings of $4.74 for the quarter vs. the reported $4.63.

As a result, Google is going to lose its "cult status" with institutional investors and will likely fall into the low $400s before finding support, he says, a view that jibes with Henry Blodget's forecast for multiple compression.

Microsoft revenue rose nearly 42% from a year ago, but it, too, is paying the price Friday for reporting lower-than-expected EPS as it deals with a slowing economy and continues to lose money in its online division.

Meanwhile, AMD slips further toward oblivion while Bleier wonders if Nvidia is now a takeover target after its steep decline.

The technically driven, led-by-financials bounce many traders have been predicting for days (if not weeks) arrived in full bloom on Wednesday.

Financial stocks were big winners, thanks to better-than-expected earnings from Wells Fargo and Charles Schwab, which raised expectations for results later this week from JPMorgan, Merrill Lynch, and Citigroup. Ben Bernanke's comments about the solvency of Fannie Mae and Freddie Mac -- the GSEs have "no danger of failing," he said -- also provided a psychological boost for shareholders after some frightening days in the past week.

Further aided by another steep drop in crude prices, the Dow jumped 277 points, or 2.5%, to 11,239, while the S&P gained 2.5% and the Nasdaq jumped 3.1%.

Somewhat lost in the focus on financials was Intel's solid second-quarter results and -- more importantly -- robust outlook.

"As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe," Intel CEO Paul Otellini said Tuesday evening.

Intel shares were up a relatively modest 1% Wednesday, but the chipmaker's results and guidance does raise (again) the possibility that certain tech stocks can sidestep the worst of the market madness.

As Henry and I discuss in the accompanying video, Intel's optimism may prove to be misplaced or a company-specific event.  Investors will get more insight on that front Thursday, when tech bellwethers IBM, Microsoft, and Google report quarterly results. (eBay, however, had in-line results and soft guidance after the close on Wednesday; shares were recently down sharply in after-hours trading.)

From Silicon Alley Insider, July 15, 2008:

A solid summer so far for Intel: The chip giant blew away Street revenue and EPS expectations for Q2, but gross margins were a bit lower than forecasted. Why? Greater demand for cheap laptops, which include cheaper chips. Guidance for Q3 is solid.

"As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe," Intel CEO Paul Otellini said in a statement.

We'll cover Intel's (INTC) earnings call LIVE at 5:30 p.m. ET; go here for the latest.

Key Stats:

Q2 Revenue: $9.5 billion, up 9% year-over-year, vs. $9.0-$9.6 billion guidance and $9.32 billion consensus
Q2 EPS: $0.28, vs. $0.25 consensus
Q2 Gross Margin: 55.4%, vs. 56% guidance
Q3 Revenue Guidance: $10.0-$10.6 billion, vs. $10.1 billion consensus, $9.9 billion (FBR)
Q3 Gross Margin Guidance: 58%, vs. 58.2% (FBR)
Full Year Gross Margin: 57%, vs. 57% guidance, FBR

Live Conference Call Notes:

5:32 Call begins. Standard disclaimers.

5:33 Record revenue; fourth record quarter in a row. Demand strong. Rev and unit shipments near high end of seasonal norm. Better 45 nm yields are lowering unit costs, increased flexibility meeting diverse requirements.

5:35 Record channel shipments in servers. Also some noteworthy design wins at Cray and Dreamworks. Growing notebook demand as prices continue to decline. Notebook beating desktop sooner than expected. Expect unit shipments of Atom processors to grow sharply in 2H.

5:37 Excited about Centrino 2 and 6-core server chip. A final word on the economic env: Very aware of global economic conditions that dominate market. We saw order patterns play out as anticipated in beginning of the year. Inventories at healthy level. Q3 see continued healthy demand for our products.

5:38 Going over results from the release.

See Also: Intel Q2 Earnings Preview: Forecasting A Summer Slowdown?

With the stock market tumbling and financials in freefall, a nation of investors turns its lonely eyes to Intel's results after the close Tuesday.

Intel is expected to report second-quarter earnings of 25 cents a share, a solid 15% above year-ago levels, and revenue of $9.32 billion, up 7.4% from the prior year.

But the big concern is Intel's outlook going forward. Following the cautious comments from Cisco's John Chambers last week about IT spending and Nvidia's profit warning on July 2, it's hard to foresee a scenario where Intel comes out and declares "everything is wonderful" in its rather-larger corner of techland. (The same can be said of IBM, which reports Thursday, and Hewlett-Packard, which doesn't report until Aug. 19.)

Notably, consensus estimates are for Intel to report only minimal year-over-year growth for the third-quarter as expectations for a recovery get pushed back into 2009.

The Dow fell 237 points or 2.1%, the S&P lost 2.3% and the Nasdaq fell nearly 60 points or 2.6% in yet another reminder that, in a bear market, rallies are meant to be sold.

In keeping with the recent pattern, financial stocks led the decline, with fears resurfacing about Freddie Mac and Fannie Mae after the latter's debt offering, while brokerage stocks like Lehman and Merrill were hit by a Fitch review for possible downgrade. Meanwhile, bank stocks like Bank of American, Wachovia, and Regions Financial tumbled after Credit Suisse's lowered earning estimates for the sector.

But in a change from recent trends, technology stocks were laggards after Cisco's John Chambers said most of the firm's customers don't see a rebound until 2009. That comment triggered some negative comments by analysts at RBC Capital, JP Morgan and UBS, as Tech Trader Daily's Eric Savitz details. (And for the record, that's why Cisco shares dropped after hours last night, not because of concerns about Chambers resigning, as I reported Tuesday.)

Amid widespread selling of big-cap tech names, Intel got hit by a negative note from Merrill Lynch - about slower overall IT spending and competition from AMD -- while Corning was slammed for a second day amid cautious comments from two big customers.

In the search for some good news, I'll note the Investors Intelligence poll shows bullish sentiment at its lowest level in 14 years, Bloomberg reports.

The market tends to bounce when sentiment is this dour because it typically means traders have taken action to reflect their negativity.

"The good news is that real selling ends up bullish in the long run [and] it's been a long time since we've had this much selling," as technician Helene Meisler explains.

The bad news is that's no guarantee the selling is over.

It got lost in the shuffle of the "June swoon," but the Nasdaq was up 0.6% in the second quarter -- not great performance, but certainly better than the Dow and S&P.

In the wake of the Nasdaq's relative strength, beleaguered investors can be forgiven for asking if the time for tech is finally at hand.

Scott Bleier, president of HybridInvestors.com, believes there is an opportunity at hand in tech stocks, but not in the sexy "cult stocks" like Apple, Research In Motion, or Google.

Instead, Bleier believes tech investors should search where expectations are lowest, namely in the chip and chip equipment sector.

Scott Bleier, president of HybridInvestors.com, is no Pollyanna; quite the contrary, in fact. Bleier believes the market is vulnerable to a "crash-ette" and says the worst part of the bear market lies ahead, as detailed in prior segments.

But even in a bear market, opportunities exist in individual stocks.

Bleier's picks include a Swedish auto safety play, a sports entertainment giant, an iTunes competitor, and a Taiwanese specialty chipmaker, as detailed in the accompanying video.

With the dollar dropping, crude prices are soaring again early Monday. The action is likely to please the crowd on Wall Street, where "the trade" is: long commodities/short the dollar and financials.

But the smart trade today is to take profits on that trade and do the opposite, says David Herro, who oversees about $20 billion as Harris Associates' chief investment officer, international, and also runs the $6.4 billion Oakmark International Fund.

"The golden days of oil area coming to an end," says Herro, who SmartMoney named as one of the "World's Greatest Investors" of 2007.

For investors with true long-term time horizons, Herro sees opportunities in financials, media, retail, and tech stocks, and danger in the "hot" commodity/agriculture names -- even as they maintain short-term momentum.