A warning from telecom gear firm Avocent, an upbeat outlook from LSI
Logic, downbeat comments on chips from Merrill Lynch and an acquisition for
IBM were among the sector's highlights last week. The mix of positive and
negative news suggests a lack of certainty for techs' outlook in general. This
week, a Fed decision, inflation indicators and ongoing monitoring of oil price
gyrations will likely get top billing. Any fresh pre-announcements and a
string of earnings reports in the software sector, notably one from Oracle,
will likely draw attention as well. So far, tech stocks are down about 7% for
the year, versus losses of over 1% for blue chips and the S&P 500 Index. MTB
Investment Advisor's Allen Ashcroft had positioned himself early in
anticipation of a new technology capital spending spree, but his stock picks
are underperforming. Nevertheless, he told Dow Jones that, "If you like a
theme, you have to give it time to play out ... (He typically holds stocks
from 18 to 24 months.) ... The action in tech has been better in the last
month or six weeks. My underperformance is starting to narrow." Internet
stocks in particular have underperformed the tech sector, losing about 18%.
Fierce competition, contracting multiples and slowing growth are plaguing the
sector, and traders, especially hedge funds, foresee more downside. One such
trader actually told MarketWatch, "These stocks are not cheap. I'm waiting for
them to drop another 30%!" However, market observer Charles Biderman said to
the news service that, given the growing economy, it is "precisely the wrong
time to be doing that [selling]," as personal incomes are rising. He eggs
investors on and recommends they take a modest position in Net stocks, keeping
in mind that as hedge funds continue to shell the group, lower entry points
could become available.
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
