In April, tech stocks fell for the second consecutive month, with losses
of over 4%. Computer and chip shares paced the decline. Last week's soft
economic reports such as GDP and durable goods, as well as a mixed batch of
corporate earnings and outlooks, did not augur well for the second quarter.
March orders for non-defense capital goods excluding aircraft, a barometer of
business spending, fell 4.7%, following a 2.5% decline in February. However,
demand for computers and electronics climbed by 2.2%. Meanwhile, consumer
spending slowed in the first quarter, although some analysts called its 3.5%
rise still respectable compared with the 4.2% gain in the prior quarter,
according to Dow Jones. The bearish camp warns in The Wall Street Journal that
the sudden marked disparity among results in the tech sector signals that
while some companies have begun to feel the bite of the economic slowdown,
others have yet to feel it. In other words, the sector's performance could
soon worsen. Yet, talking to the daily, Sanford Bernstein's Vadim Zlotnikov is
more upbeat, noting that over the past 25 years, tech sales have posted
average sequential declines in the first quarter of about 7%, which is the
case this time around. Separately, Merrill Lynch found that while chief
information officers reined in tech spending in 1Q, they expect spending to be
on track in 2Q. In particular, Merrill is bullish on smaller chip and chip
gear companies after its survey of small businesses found that IT spending is
their most relevant form of anticipated capex. Smith Barney's Tobias Levkovich
is also optimistic, telling Dow Jones that, "We believe that this year will be
different, [that people will not sell in May and go away, as often is the
tradition]," thanks to earnings growth and deal drivers. Or, as Naroff
Economics Advisors' Joel Naroff summed it up for the news service, "If it
walks like a soft spot and talks like a soft spot, it just might be a soft
spot."
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
