North American markets stumbled out of the starting gates Monday as the tech sector was hit by another negative report, this time from Merrill Lynch. The Wall Street investment house downgraded a slew of semiconductor stocks including blue chip Intel Corp.

As of midday, Toronto’s S&P/TSX composite was off 58.42 point or 0.69% to 8414.76, while the TSX Venture Exchange was struggling to stay in positive territory; it was up 1.78 points or 0.11% to 1584.75.

In New York, the Dow Jones industrial average was down 41 points, or 0.4% to 10172.3, while the Nasdaq composite index slid 20.16 points or 1.04% to 1926.17 and the S&P 500 dropped 4.5 points or 0.4% to 1108.3.

Merrill Lynch cut its recommendation on chip giant Intel to “neutral” from “buy” as part of a broader shift to a more negative stance on the semiconductor sector.

In Toronto, technology stocks as a group were off more than 2.2%. But all sectors were dragged lower in the process.

Investors have become increasingly pessimistic as profit warnings pile up, notably from the tech sector. One market strategist noted that earnings reports are going to be good for the most part because the economy has been relatively strong to date. But the market is more concerned about where earnings are headed as signs suggest the economy is cooling.

Corporate earnings reports are due this week from the likes of Intel, Citigroup Inc., Johnson & Johnson, IBM and CanWest Global Communications. In addition, U.S. and Canadian inflation reports are expected Friday.

Overseas, European indexes were lower, as London’s FTSE 100 index fell 32.4 points to 4,360.8. Frankfurt’s DAX 30 fell 0.89%, while the Paris CAC 40 was down 0.46%.

Asian stock markets closed mostly lower, but prices rose in Tokyo after Prime Minister Junichiro Koizumi’s ruling bloc maintained its majority in the upper house after parliamentary elections. Tokyo’s Nikkei Stock Average of 225 issues rose 158.75 points, or 1.39%, to 11,582.28.

In Hong Kong, the key Hang Seng Index slipped 11.25 points, or 0.09% to 12,191.01. Brokers said prices edged higher in the morning session following Friday’s gains on Wall Street, but the index was pushed into negative territory in the afternoon on selective profit-taking.

The Canadian dollar was off 0.04 of a cent to US75.82¢. The only bit of economic news was that non-residential construction reached a mid-year record of $13.3 billion after advancing by 0.5% in the second quarter to $6.7 billion. Statistics Canada said in the institutional sector, governments invested a record $2.4 billion, a gain of 1.4% from the first quarter.

Health-care construction sites overtook educational buildings as the main source of growth in institutional investment. But while commercial construction spending rose 0.9% to $3.3 billion, industrial sector investment fell 2.6% to $1.0 billion, the third straight quarterly decline.