They just don't tolerate 'em the way they used to.

During June, the market generally absorbed the shock of earnings warnings from a number of technology companies, such as

EDS

(EDS)

. But Wednesday, warnings from several software companies --

Computer Associates

(CA) - Get Report

,

Entrust

(ENTU)

and

BMC Software

(BMCS)

-- helped to sink all of technology.

Wednesday's debacle, which saw BMC lose 50% of its value, is probably an overreaction.

While there are specific

reasons for the warnings, the barrage of shortfalls in business software stocks may be an indication that companies, faced with a slowing economy, may be starting to conserve capital. That's not a certainty, but it's possible that, for a couple of quarters, the earnings outlook may not be as rosy as hoped and that the soft landing is going to hit a few bumps. It's also a signal that investors are waking up to the possibility that there may be some -- gasp -- cyclicality to technology stocks.

"There may be a slightly -- and I say slightly -- growing recognition that any attempts to curtail consumption in the U.S. and throughout the world may eventually permeate into tech-related spending one way or another," says Ned Riley, chief market strategist at

State Street Global Advisors

in Boston.

Software's 404 Error

It should be said that, often, software companies experience what's called "hockey stick" earnings. That is, a good deal of their revenue occurs very late in the quarter. Should major customers decide, for whatever reason, not to buy software or equipment, the shortfall is more pronounced in a way that a lackluster month wouldn't be for an auto company. It has happened to big boys like

Oracle

(ORCL) - Get Report

, even during periods of terrific earnings growth.

But strategists say the factors extend past these events. Higher borrowing costs, induced by the

Federal Reserve's increases in the

fed funds rate, has caused companies to rethink their capital spending expenditures, they say. Equity is no longer easily available for newer companies, and that has resulted in demand for the infrastructure provided by business software and networking companies.

"What usually slows if the economy is going to slow is discretionary spending," says Doug Cliggott, chief market strategist at

J.P. Morgan

. "In businesses, that's capital expenditures. They say, 'We like that software but maybe we can wait three months to buy it.'"

Perhaps Wednesday's warnings, then, will cause investors more frequently to pair specific examples of declining earnings growth with macro economic reports. In the past, stock investors cheered soft economic data, heralding it as a signal that the Fed would soon stop raising rates. But if companies are starting to feel the pain of the Fed's tightening campaign, investors won't rally the market after a weak

National Association of Purchasing Management

Purchasing Managers' Index

, as they did on

Monday.

"That's the soft-landing coin," says Syl Marquardt, director of research at

John Hancock Funds

. "On one side, the Fed's happy and we have no inflation, and on the other side is, well, someone's ox must be gored in the slowdown, and people are wondering, which ox will that be?"

Cyclicality -- in Tech Stocks?

Say it isn't so, but these factors -- slowing demand, worry over higher borrowing costs -- signal a measure of cyclicality to earnings growth in technology stocks. Generally, software and chip stocks weren't considered cyclical -- that is, rising and falling with the fortunes of the economy -- because their technological innovation was something other companies and consumers were rushing to buy.

However, Wednesday's warnings, coupled with analysts' predictions of slowing growth in the semiconductor sector, are early signs of such cyclicality. While, unlike other cyclical sectors in a slowing economy, earnings growth will remain strong, it just won't offer the same kind of year-over-year comparisons that investors like to see in computer and software stocks.

"If the growth rate has peaked at 35% to 40%, and then it slides, that's not necessarily a pretty picture for investors -- notwithstanding the fact that the growing is still exceptional," says Riley. "But stock prices had built in a high expectation level, and anything short of that is considered calamitous."

The market's performance in the last few weeks seems to indicate that investors are at least awakening to that feeling. Technology stocks have rallied in fits and starts, only to be kicked back a bit as investors pull back and put money into defensive stocks.

But for a market used to the

Nasdaq Composite Index soaring high on great expectations and thudding back to earth almost as quickly, this kind of uncertainty may last a while: longer than investors have been used to -- and more like the lumbering

Dow stocks.

"If a Fed tightening is a three- to four-quarter project, the playing out of this might well take three to four quarters, and I don't know that investors are prepared for that lengthy a period of a slowdown," Marquardt says.

As originally published, this story contained an error. Please see

Corrections and Clarifications.