The new year will finally start in earnest this week, as the earnings
season kicks off, with releases from the likes of Sun Microsystems and Intel.
Results and forecasts from the latter will likely be scrutinized for trends in
the chip sector, which declined notably in 2004. In a research note, UBS
states, "The semi industry is now transitioning to slower growth with expected
normal seasonal patterns and improved [year-on-year] comps in 2H05. Given that
stocks typically anticipate fundamental inflection points, a down 1Q05
followed by a stronger 2H05 may yield an attractive buying opportunity in
early '05." Overall, the broker likes "analog and wireless handset food-chain
over PC," and sees the greatest near-term risk in the telecom gear market.
Meanwhile, economic reports such as retail sales and the University of
Michigan's sentiment survey will likely draw attention as well this week, as
indicators of the consumer's mood about spending, including spending on
electronics. Boys Arnold & Co.'s John P. Rhodin told Dow Jones, however, that
business investment and capital spending, rather than consumer spending, will
be the key drivers of the U.S. economic growth this year. In other 2005
prognostications, some analysts predict the continuation of last year's
trends, with small-caps outperforming, albeit at a more moderate pace, while
others foresee a return to a more defensive stance, with strength in large-
cap, dividend-paying stocks, given a more muted outlook for the broader
economy, as interest rates will rise. On the earnings front, some bulls remain
penned in their camp, saying, like Wells Fargo's James Paulsen to The Wall
Street Journal, that corporate profits consistently outpaced expectations
during 2004 and will again in 2005. Others, however, believe that, in light of
recent warnings in a variety of sectors, including tech, profit growth is
likely to slow, and thus, stocks are currently overvalued. In sum, bulls and
bears will be back at it this year in their perennial contest.
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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