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FILE - In this July 20, 2010 file photo, a Netflix customer looks for a movie on Netflix in Palo Alto, Calif. (AP Photo/Paul Sakuma, file)

Today: Intel (INTC) hits a 52-week low as technology stocks drop and take Wall Street along for the downhill ride. Also: Earnings season begins, and Silicon Valley's next big initial public offering gets bigger.

Tech stocks plummet, pulling indexes down

Technology stocks took a hit Tuesday as investors grew pessimistic about the sector's chances for solid earnings reports amid analyst downgrades to big-name Silicon Valley companies.

Chipmaker Intel was singled out as a large reason for Tuesday's sell-off in tech stocks, as the Santa Clara company was hit by a wave of analyst downgrades following Monday's report that the company would lay off workers at McAfee. Robert W. Baird analyst Tristan Gerra cut his price target on the stock from $32 to $26 on concerns of lessening demand for laptops, while Bernstein Research analyst Stacy Rasgon downgraded the stock to "underperform" and slashed the price target to $20 from $24.

"Intel's phenomenal revenue growth over the last couple of years has been out-of-sync with many data points in PCs," Rasgon wrote.

In response, Intel shares declined to a new 52-week low of $21.85 before closing with a loss of 2.7 percent at $21.90.

Intel rival Advanced Micro Devices capitalized on weakness at the world's largest chipmaker, with shares in the Sunnyvale company increasing 1.9 percent as it reportedly launched a new chip aimed at tablets. While AMD has struggled this year, Rasgon said that it is the better stock than Intel at the moment.

"Here we have the curious situation that arises often in investing -- namely, separating good companies from good stocks. Intel is certainly the former but may not be the latter; AMD (while certainly risky) may be, we believe, the reverse," Rasgon wrote.

AMD was one off very few tech stocks in the black on Tuesday, however. Netflix (NFLX), which gained 10 percent Monday after Morgan Stanley upgraded the stock, fell even harder Tuesday after Merrill Lynch downgraded the stock and Moody's considered downgrading its debt rating. The Los Gatos video-on-demand company has suffered violent swings in its stock price as analysts disagree on its ability to maintain dominance in the face of competition from Amazon, which is reportedly establishing new ways of doing business in the streaming-video market.

"It has become a real battleground stock," Nick Gibbons of Gradient Analytics, a research firm that has a dim view of Netflix's prospects, told The Associated Press.

Netflix shares declined 10.9 percent to $65.53 Tuesday, after hitting three-month highs on Monday.

Other Silicon Valley tech companies declined as well: VMware plummeted 5.5 percent, LinkedIn fell 4.2 percent, eBay (EBAY) dropped 3.6 percent, Google (GOOG) declined 1.8 percent and Oracle (ORCL) dropped 1.7 percent. Companies that have already faced weakness on Wall Street continued to fall, as well, with Apple (AAPL) declining 0.4 percent and Hewlett-Packard (HPQ) falling 0.6 percent as Citigroup initiated coverage with a "sell" rating.

The decline in tech stocks brought down the indexes, with the tech-heavy Nasdaq taking the brunt of the decline with a drop of 1.5 percent. The Standard & Poor's 500 fell 1 percent and the Dow Jones industrial average dropped 0.8 percent, while the SV150 index of Silicon Valley's largest technology companies declined 1.3 percent.

Earnings season begins amid renewed pessimism

Part of the reason for Tuesday's decline was the beginning of earnings season, which for the second consecutive quarter has brought about pessimistic feelings about global demand for technology.

"It's a good bet that companies aren't significantly expanding their tech projects at this point," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group, told Reuters on Tuesday.

Tech stocks took a hit at the turn of the quarter three months ago, but many stocks rebounded and turned in a strong quarter after lessening demand only struck a few companies instead of the industry as a whole. The same could happen this quarter, with investors pushing stocks down on pessimism and then buying them back after earnings are reported.

"There's so much pessimism over earnings that there's room for upside with any positive surprise," Paul Zemsky, the head of asset allocation for ING Investment Management, told Bloomberg News. "Overall I think traders are too pessimistic."

Analysts expect quarterly earnings for companies listed in the S&P 500 to decline about 2.3 percent from the same quarter a year ago, Reuters reported Tuesday.

The traditional kickoff of earnings season, the report from Alcoa, occurred Tuesday, and the aluminum maker beat Wall Street expectations while posting a big drop from the year-ago period, validating many observers' feelings about this quarter's earnings reports.

Flashbacks from last quarter's trimmed forecasts struck Tuesday, however, when Chevron, the second-largest U.S. oil company, announced that its third-quarter earnings would take a big fall. The San Ramon company cited the August fire at a Richmond refinery, and said it would keep an important unit of those operations offline through the rest of the year.

Workday increases range of possible prices for IPO shares

Silicon Valley's weak week so far on Wall Street could turn around Friday, when Pleasanton cloud software company Workday debuts on the New York Stock Exchange. On Tuesday, the company increased the expected price of its first issuing of shares, pushing the possible price from a maximum of $24 to a top mark of $26.

Workday was founded by co-CEOs Aneel Bhusri and David Duffield, PeopleSoft veterans who established a similar company after their firm was purchased by Redwood City giant Oracle in 2004. At the top of the new range of possible prices, Workday would bring in $591.5 million and receive a valuation of more than $4 billion.

Of course, Workday could still push the price higher -- it is expected to set the final cost of its IPO shares Thursday evening and debut Friday on the public market. When it does, analysts believe it will perform strongly.

"It will be the biggest cloud-based tech IPO this year," IPO Boutique senior managing partner Scott Sweet told Bloomberg News. "The institutions are coming in with monstrous orders and are willing to pay more than the prevailing price range. They want the deal very badly."

Silicon Valley tech stocks

Up: AMD, Zynga, Electronic Arts

Down: Netflix, VMware, LinkedIn, eBay, Jive, Tesla, Yelp, Intel, Nvidia, Google, Oracle, Adobe (ADBE), Gilead, Intuit (INTU), Yahoo (YHOO), Splunk, NetApp, Applied Materials

The tech-heavy Nasdaq composite index: Down 47.33, or 1.52 percent, to 3,065.02

The blue chip Dow Jones industrial average: Down 110.12, or 0.81 percent, to 13,473.53

And the widely watched Standard & Poor's 500 index: Down 14.4, or 0.99 percent, to 1,441.48

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.