From Briefing.com: Excitement isn't a word one would use to characterize Tuesday's activity in the tech sector, but nonetheless, bulls had reason to be excited by the tech sector's resilience following Monday's strong gains. A confluence of factors contributed to the resilience, not the least of which was a CPI report for May that quieted concerns about deflation and a reaffirmation from Treasury Secretary Snow that he expects real GDP growth of about 3.5% in the second half of the year.
Leadership from Microsoft (MSFT) was another supportive factor as the software company jumped 2.2% on heavier than average volume after Lehman Bros. reiterated its Overweight rating and said MSFT's valuation remains compelling.
The market, in keeping with its bullish mindset, didn't seem too bothered by the added blurb from Lehman Bros. that its recent conversations with IT managers didn't suggest a material pickup in information technology spending was in the offing. To that end, it was also noted in a Reuters story that SAP's (SAP) CEO said that, based on his discussion with customers, he sees no early signs of a spending recovery.
Such acclimations, of course, are rallying cries for the skeptics out there, but with the Fed expected to cut interest rates next week, the notable lack of earnings warnings, and the proverbial window dressing by fund managers as the quarter draws to an end, the tech sector managed to hold its own as traders remained predisposed to view dips as a buying opportunity, knowing that the trend has very much been their friend.
Momentum, admittedly, remains on the side of the bulls and the tech rally may still have more room to run. Be that as it may, Briefing.com would suggest to investors that they refrain from initiating new positions over the near-term in high-flying areas like semiconductor, biotech, Internet, and telecom equipment as the maneuvering of fund managers chasing performance at the end of a quarter can create a false sense of security that the tech rally will continue unabated.-- Patrick J. O'Hare, Briefing.com
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