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Tech stocks plummeted Monday morning after the Standard & Poor’s downgrade of the U.S. credit rating Friday, faring even worse than the overall market.

The slide could spell bad news for tech companies looking for a big market debut. Reuters reports that some companies are pulling or postponing IPOs as economic woes worsen.

After opening, the Dow slipped 332 points to 11,112.70, the S&P fell 45 points to 1,154.10 and the NASDAQ composite dropped 103 points to 2,429.82. Tech stocks are in a rapid sell-off and, just like last week, taking a greater blow than the overall market.

Forbes' Eric Savitz has a good post on why tech stocks are taking such a beating. They tend to be more sensitive to swings in the market as consumer spending on electronics (hardware and software) drops off when the economy worsens. Tech stocks also tend to be more volatile in general due to higher beta.

Amazon, Microsoft, Google and Apple are all trading lower this morning: Shares in Amazon.com (AMZN) were down more than 3 percent; Microsoft (MSFT) was down almost 2.5 percent; Google (GOOG) was down more than 3 percent; and Apple (AAPL) was down 2.5 percent.

Washington tech companies such as Clearwire and Zillow also took a hit.

Last week was the worst five-day trading period since November 2008. Following last Thursday's 513 point drop (one of the worst days ever for the Dow), the S&P downgraded the U.S. credit rating from AAA, the highest level, to AA+. This marked the first time the nation’s credit rating has fallen below AAA.

The S&P said the downgrade was due, in large part, to the failure of the U.S. debt reduction deal to address federal spending problems. However, the S&P also commented this morning on how tech stocks might be affected by the new rating.

They suggest those in the IT and semiconductor industries as more vulnerable, while software companies with significant maintenance revenues are well situated. Analysts also said bellwethers like IBM and Oracle could stand to benefit by repurchasing stock and making acquisitions, while telecom giants such as AT&T and Verizon could attract significant investor attention this week. See the full report at the end of the story.

Check out the Puget Sound Business Journal for a look at the 10 worst days ever for the Dow.

From S&P analysts Scott Kessler and Todd Rosenbluth:

“For the S&P 500 technology sector, S&P Equity Research Services sees a number of potential impacts related to the recent downgrade of the U.S. sovereign credit rating. Prior to this loss of the top investment grade rating for U.S. sovereign debt, our view was that technology companies within the S&P 500 generally had mixed fundamental outlooks, relatively low P/E and P/E-to-growth multiples (in comparison to the S&P 500 and historical data), and strong balance sheets. We note that near-term U.S. debt downgrade-driven worries could dampen demand, but the third quarter is typically the least important for the technology sector. However, related after-shocks affecting fourth-quarter business could have serious repercussions.

Following the U.S. debt downgrade, we see more cyclical technology industries, such as semiconductors and semiconductor equipment, as more vulnerable, reflecting greater macroeconomic uncertainties and potential challenges associated with supply-chain financing. We also think IT services is an area that could be adversely affected, given exposure to federal and municipal government spending. Conversely, we think software companies with significant maintenance revenues and services companies with notable recurring revenues are relatively well situated.

In terms of companies/stocks, we think large-cap companies, with considerable revenue diversification (across segments and geographies), generating solid to strong free cash flows, and having constituted strong and flexible balance sheets are worth considering in this environment. Bellwethers such as International Business Machines and Oracle should fare relatively well, in our view. These kinds of companies could also capitalize on opportunities in terms of competitive bidding, M&A and stock repurchases.

S&P Equity Strategy continues to advise a marketweighting, based on fundamentals, technicals, and macroeconomic considerations, for the technology sector, which comprises 19% of the S&P 500 index.

S&P Equity Research is neutral on the fundamentals of the sector, given concerns related to economic growth, PCs, and Japan. The PC area, especially on the consumer side, has been a weak spot as tablets and more powerful smartphones have likely been resulting in reduced demand. The uncertainty caused by the U.S. debt downgrade is unlikely to help this situation.

While the two largest companies in the telecom sector are facing distinct challenges, S&P Equity Research believes AT&T and Verizonare likely to attract investor attention this week, as they have the strongest balance sheets in the sector (A- from S&P Ratings), generate adequate free cash flow to support their dividends, yielding approx 6%, and have wireless operations focused on customers with strong credit profiles. However, AT&T is in the midst of closing its pending deal for T-Mobile USA that will require debt financing, while a large portion of Verizon’s wireline employees went on strike this past weekend. In contrast, we think more moderately sized integrated telecom carriers such as Frontier Communications andAlaska Communications that have non-investment grade credit ratings from S&P and that pay a significant portion of the their free cash flow for dividends are a greater risk as they could be hurt more as corporate interest rates rise.”