Monday, May 30, 2005
Technology stocks enjoyed a merry month of May, logging gains of over 9%,
as bargain-hunters surfaced after April's showering losses. Chip shares led
the sector for most of May, followed by Internet, telecom gear and computer
issues. Software shares continued to lag, as the sector still suffered from
April's infestation of profit warnings. Looking ahead, technical analysts are
betting on the chip sector again. Although the SOX Index "is a little
overbought at the moment, ... whatever weakness that develops should not be
disturbing," explained Princeton Financial Group's Philip Rettew to Dow Jones.
He believes a lot of the "weak," or short-term holders like day traders, have
been wrung out because recent low prices have convinced them to head for the
exits, and now more people who perceive value, those who buy and hold, are
coming in. They will create less supply for those who come in later. The
analyst adds that the SOX had faced some resistance, but broke through a
downtrend, which suggests it could go higher, from around 424 to 453, its
December 2004 high, and then 490, last reached in June 2004 when it built a
top. Elsewhere, S&P's Richard Stice tells BusinessWeek he is bullish on the
computer storage & peripherals sector. Stice expects storage to be a high
spending priority in 2005 due to an increasing emphasis on data backup and
replication requirements associated with Sarbanes-Oxley legislation. Also,
while the printer market may be seen as a lower IT spending priority, a
reviving global economy and renewed interest in color and digital product
lines could provide support. The analyst adds that sector companies now have
more robust capital structures, with a healthy amount of cash and investments
and ongoing free cash flow generation. Also of note this week, any upbeat
surprise from the job report could further boost sentiment about techs and the
broader market.
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 Corporate Group
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