The tech sector ended slightly lower last week, amid a fresh batch of
profit warnings. Yet, as of last week, the sector gained over 2% for the month
of September, a timid reversal from August's 5% decline. Also as of last
Friday, semis rose over 1%, telecom gear firms added more than 2%, while
Internet shares leapt around 4%. In addition, stock buyback announcements
picked up in the sector, which was often interpreted as a sign of confidence
from select corporations. Also of note, AMG Data Services reported that in the
week ended September 15, technology funds saw their first cash inflows since
the end of January 2004, with a total of about $50 million and a preference
for semi shares. Separately, a number of analysts, including Sanford
Bernstein, defended the chip sector last week. Wedbush Morgan Securities is
also bullish, overweighting the group. In a research note, the broker explains
that, "since the stock market as a whole discounts events three to six months
ahead, the fundamentals and earnings should be bottoming in the [third quarter
of 2004] and it is natural for stock prices to lead the earnings estimates
revision inflection point; it is a good time to buy [chip stocks]." Another
reason is that seasonally, the fourth quarter is typically the best quarter
for tech stocks and if our fundamental outlook is correct, then 2004 should
not be the exception year, adds the broker. Recent upbeat comments from the
Fed about the economy and its intimation that the recent soft patch is
transitory and results from a nearly completed adjustment to higher oil prices
seem to also be behind the chip binge, generating sentiment that amid the
recent sector warnings, companies may have overshot on the conservative side.
This week's raft of economic data such as the ISM Index could further buoy the
sector, or signal it's time to fire the emergency flare.
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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