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Stock market investors are in a bloodbath. But technology stocks in the past few months have been relatively protected. There was even talk of a “bubble.” Now, recent market activity has sent investors running from equities into safer investments like treasuries.

So what does this mean for upcoming big IPOs like Zynga and Groupon or even Yelp, which is expected to file for an IPO sometime later this year?

A broad sell-off

Concerns about rapidly rising debt in Europe and the United States sent markets into a tailspin, with the tech-heavy Nasdaq Composite Index falling more than 9 percent this week.

The Nasdaq fell through a key level of “support,” a measure that traders use when designing algorithmic trades. Once the index value falls below that level of support, it sends a signal to many algorithms to sell off stocks and prevent the loss of additional money invested in equities. The same is true for levels of “resistance,” which send signals to algorithms to stop buying stocks due to risk.

“A technical break on the Nasdaq would suggest further downside than upside,” Janco Partners analyst Mike Hickey told VentureBeat. “The fear is that we’re approaching a recessionary environment. The consumer is less optimistic on the future. That can hurt discretionary items like games.”

That’s the “technical” side. Then there’s the more human side, where investors may shun algorithms altogether and seek to invest in cash or safer areas with less risk than technology stocks. More on that in a sec.

The Nasdaq previously held support at around 2,620, while the market found levels of resistance at around 2,880. Yesterday’s massive sell-off broke the technical level of support on the Nasdaq. That sent tech stocks into a tailspin, with the Nasdaq closing down 1 percent today at 2,532 and reaching as low as 2,465 at one point. Another major index watched by investors, the Standard & Poor’s 500 Index, held steady.

The Standard & Poor’s 500 Index fell 4 percent on Thursday, and the week’s sell-off wiped out about $3.5 trillion of market value by the end of trading on Friday. The broad sell-off ignited further fears of a double-dip recession as investors fled equities and scrambled to lock in definitive returns on investments — sending options activity to record levels for the year.

Recent IPOs

With investors bailing out of equities, the market could be more skittish toward impending high-profile initial public offerings. Both Groupon and Zynga have filed to go public to raise enormous amounts of money, and are set to make their debut in the near future. But concerns about a slowdown in the economy, thanks to roundabout debt talks, might lighten the appetite for those IPOs.

LinkedIn’s trading debut in June went extremely well, but the company that once had a market cap of more than $10 billion has seen more than $1 billion in value wiped out in two days. The company is now trading at around $91 and has a market cap of $8.6 billion. That’s still well above the valuation of $4 billion it claimed when it priced the shares of its initial public offering between $42 and $45.

Cloud music provider Pandora might provide another clue to LinkedIn’s woes: That company had a relatively mellow debut in public trading, but it ended the week at a higher position than what it held before Thursday’s broad sell-off. The company opened trading at $13.19 a share on Thursday, and ended that day at $13.56. It ended trading Friday at $13.48. That company is listed on the New York Stock Exchange, where trading was a little more steady.

Priceline — one of the broad market’s largest gainers — was up nearly 10 percent after its quarterly profit exceeded Wall Street expectations. Market analytics provider ComScore’s shares were also up nearly 10 percent. Shares of domain provider, which announced it would acquire Network Solutions, were also up 15 percent.

Bellwether consumer hardware providers fell for the most part, with iPhone manufacturer Apple down around 1 percent. Microsoft, which manufactures the Xbox 360 alongside its Windows software, fell 1 percent. Chip-maker Intel edged down slightly with a 0.3 percent decline. Dell, a provider of hardware for enterprises, edged up 0.4 percent when trading ended Friday.

What about Zynga?

Zynga has become a Facebook distribution powerhouse like no other game company. The company has delivered hit after hit to Facebook. It filed to go public, hoping to raise up to $1 billion at an expected valuation between $10 billion and $20 billion, in July and it made around $90 million in 2010 and $11.8 million in the first quarter this year.

The company was hoping to ride a wave of positive sentiment led by LinkedIn and Pandora after those companies picked up multi-billion dollar valuations when they went public.

But game stocks were down at least 1 percent across the board. Saints Row developer THQ Interactive was the worst performer after falling nearly 6 percent, while publishing supergiant Electronic Arts fell by about one percent. Those companies revolve around delivering cinematic triple-A titles like Activision’s Call of Duty: Modern Warfare 3. Those games still carry large price tags, which would give social and online gaming companies the edge.

“The casual market of social networking and mobile, that sort of potential is still strong,” Hickey said. “In a down market, social is gonna do really well.”

Blizzard Entertainment, owned by holding company Activision-Blizzard, also has one of the largest online games in the world and generates an enormous amount of revenue from its digital distribution. Those games are typically resistant to recessions because they use subscriber models and the company regularly releases new content and it doesn’t require players to pay an upfront $60 for a game.

“Amid a friggin’ global meltdown, World of Warcraft actually grew its subscriber base,” Hickey said. “It’s incredibly resilient to weak economic periods.”

Games like World of Warcraft also have value-added services that Blizzard Entertainment can charge for, like switching servers and buying additional cosmetic items for a character. That helps the company generate additional revenue from its games, along with digitally distributing its games at a price lower than typical brick-and-mortar game store prices, Wedbush Securities analyst Michael Pachter told VentureBeat.

But the strong performance of World of Warcraft wasn’t enough to keep the company’s share price afloat this week. Activision-Blizzard fell 1 percent in trading on Friday and ended the week down around 5 percent despite posting strong results on Wednesday.

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