Nerves will be on edge throughout the technology sector this week as some of the industry’s biggest names prepare to report their second-quarter results.

A sharp sell-off last week led the Nasdaq Composite to its worst five-day performance in more than a year.

With Microsoft, Google, Yahoo, Intel, Ebay, Apple Computer and IBM set to post their quarterly earnings this week, some strategists have begun to re-examine their bullish assumptions.

“It’s tough being a bull lately,” said James Paulsen, chief investment strategist at Wells Capital Management. In a recent note, Mr Paulsen said tech stocks’ recent declines could represent a buying opportunity, as price to earnings ratios fall to more favourable levels.

“On the surface, the numbers aren’t bad,” he said, referring to prospects for healthy corporate profits. “Fundementally, I don’t see much that’s wrong.”

Yet recent news has cast a pall on the sector.

Profit warnings by a handful of prominent technology companies, combined with broader market jitters over oil prices, inflation and the threat of full-scale war in the Middle East, have contributed to sharp losses that have pushed technology stocks into the red for the year.

Jack Caffrey, equity strategist at JPMorgan Private Bank, said that although he believed earnings in the second quarter were likely to remain strong, there had been a “subsantial shift in sentiment” in recent days.

“We’ve seen some smaller companies reporting weaker news,” he said.

“We are seeing consistent negative revisions within the technology sector. There seems to be nowhere to go for relief.”

Some analysts had been expecting a boom in IT spending this year as companies spend cash amassed during a period of record profits to upgrade their IT infrastructures. But so far it has not materialised.

“For all the strength in the economy, companies are tending to be fairly conservative with their cashflow,” said Mr Caffrey.

Advanced Micro Devices this month warned sales in the second quarter would be lower than expected. Intel is also bracing for a bumpy ride after it reports earnings on Wednesday.

Shares in EMC fell 11 per cent last week after it warned earnings would fall below forecasts.

They then fell an additional 5 per cent on Friday after it cut its outlook for the full year.

Shares in Apple Computer fell 8 per cent last week amid concerns that sales of the iPod music player may not be enough to sustain current levels of sales and profits growth. Google fell 4 per cent last week ahead of second-quarter results.

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