Tech stocks ended 2004 modestly higher, with gains slightly over 1%.
Internet shares won the race, rising over 20%, followed by software issues,
which climbed over 8%. Telecom gear firms advanced more than 3%, but chip
shares tumbled over 20%, following a long string of corporate warnings in the
sector. Looking ahead, most prognosticators expect that this year, the broader
market will record gains similar to 2004, according to The Wall Street
Journal. In techs, rising demand from Asia, excluding Japan, will be the
industry's main growth engine, reported Gartner to The Financial Times, while
global IT spending is set to rise by 5%, up from 3.3% in 2004. Also, consumer
tech spending is likely to slow, while demand from small and medium-sized
businesses could peak, predicted Merrill Lynch's Steve Milunovich to FT. Among
other predictions, some observers noted that corporations likely rushed up to
buy new equipment by year's end in order to benefit from a related tax relief
act, a trend that could bring upbeat earnings surprises in the first quarter,
but could later lead to a spending pullback and profit warnings in March. On
the bright side, Smith Barney's Tobias Levkovich told CNNMoney that when
companies are busy buying new gear, it is often with the intention of hiring
more people to use it. Thus, in the medium term, this could lead to improved
consumer confidence and spending, including tech spending, as the labor
situation improves. However, spending often involves borrowing, and some
fundamentalists warn that rising interest rates may eventually slow profit
growth. Talking with WSJ, Merrill's Richard Bernstein warns, "You've got the
Federal Reserve raising interest rates, and the Fed is notorious for taking
the punch bowl away from the party." Thus, not unlike last year, prospects for
the beginning of the year may be quiet bright, while as 2005 progresses,
uncertainty mounts in relation to spending and interest rate trends.
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial
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