"Expensive tech stocks are for sale in a big way," commented Steve
Massoca, head of trading for Pacific Growth Equities, to The Wall Street
Journal last week. Indeed, this seemed to be the theme in the tech sector last
week, and for 2005 so far as well. The tech sector has lost over 5% on the
year, with chip, telecom gear and Internet stocks pacing the decline, logging
losses of over 7% for the first two and 9% for the Internet group. Despite a
few positive standouts, many key players in the sector such as Motorola, eBay
and Lucent Technologies disappointed with their results and/or forecasts.
Given that the markets are forward-looking, reflecting trends about six months
ahead, according to veteran analysts, the recent debacle may signal an end to
the bull market. Profit growth for S&P 500 companies, which reached about 20%
in the past several quarters, is now expected to be a more modest 7.8% in the
first quarter, according to Thomson Financial. "We are looking at an aged bull
market, no doubt about it," explains Leuthold Weeden Research's Eric Bjorgen
to the WSJ. The median duration of a bull market since the beginning of the
20th century has been about 27 months, which we have already reached. "You
usually see performance begin to trail off after 22 months. We are looking at
what has historically been the inflection point for the bull market, where you
begin to see weakness," Bjorgen adds. The recent weakness is especially
disturbing, since January is often an up month, when new retirement funds are
moving into equities. Cautious outlooks and lower quality earnings, in
addition to still robust oil prices and the prospect of higher interest rates,
are making stocks, including techs, look expensive. In such an environment,
investors could turn pickier and defensive. One consolation prize--bear
markets tend to be shorter than bull markets.
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
back to top
